As we have mentioned here on our blog previously, provisions such as non-compete and non-solicitation clauses, as well as confidentiality and non-disparagement clauses, have been at the center of many cases over the years. The National Labor Relations Board (“NLRB”) has now issued a decision, reverting to prior precedent, that should make employers think twice about including broad confidentiality and non-disparagement clauses in severance agreements for non-supervisory employees.
On February 22, 2023, the NLRB issued a decision regarding the enforceability of broad confidentiality and non-disparagement provisions in severance agreements for non-supervisory employees, whether they are a union member or not. The Board found that an employer who offers a severance agreement to employees in a non-supervisory role that includes a confidentiality and/or non-disparagement clause that broadly restrict the exercise of the employees’ NLRA rights will be in violation of Section 8(a)(1) of the National Labor Relations Act (“NLRA”). On March 22, 2023, the NLRB general counsel issued a memorandum expressing her position supporting the decision and stating that it is retroactive. Although the memorandum is not legally binding, employers should think about whether their severance agreements with non-supervisory employees should be revised.
The decision at issue was McLaren Macomb, 372 NLRB No. 58 (2023). In McLaren, a hospital that furloughed employees during the Covid-19 pandemic offered those employees severance agreements that prohibited them from making statements that could disparage the employer and from disclosing the terms of the agreement itself. The Confidentiality Agreement and Non-Disclosure provisions stated as follows:
Confidentiality Agreement: The employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.
Non-Disclosure: At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.
The Board’s decision returned to prior precedent, which had been reversed by the NLRB decisions in Baylor University Medical Center and IGT d/b/a International Game Technology. Those decisions found that offering similar severance agreements to employees was not unlawful. In McLaren, the Board determined that simply offering employees a severance agreement that requires them to broadly give up their rights under Section 7 of the NLRA violates Section 8(a)(1) of the NLRA. The Board further determined that the employer’s offer is itself an attempt to deter employees from exercising their statutory rights, at a time when employees may feel they must give up their rights in order to get the benefits provided by the agreement.
The memorandum issued by the NLRB general counsel, while agreeing with the Board’s decision, did state that confidentiality and non-disparagement provisions that are narrowly tailored may be enforceable. With regard to the non-disparagement provisions, for example, counsel stated that a “narrowly tailored, justified, non-disparagement provision that is limited to employee statements about the employer that meet the definition of defamation” may be lawful.
Whether the McLaren decision, or any subsequent decision with the same or similar outcome, will face court challenges remains to be seen. In the interim, however, employers should consider whether these provisions are necessary in their severance agreements and if so, consider including a disclaimer that said provisions do not restrict the employee from exercising any rights they might have under the NLRA.
Disclaimer: The information contained in this post is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls and communications. Contacting us, however, does not create an attorney-client relationship.