On February 21, 2023, the National Labor Relations Board issued its decision in McLaren Macomb, ruling that severance agreements containing broad confidentiality provisions or non-disparagement provisions prohibiting an employee from making public statements about the employer or disclosing the terms of the agreement violated the employee’s Section 7 rights under the National Labor Relations Act (NLRA), which allow employees to discuss the terms and conditions of employment. A month later, the NLRB general counsel issued a guidance memo further explaining her view on the scope and effect of the McLaren Macomb decision.
Of note, the guidance memo took the position that the McLaren Macomb decision has retroactive application. It also claimed that the six-month statute of limitations period for an unfair labor practice may not apply because an unlawful provision may be a continuing violation. In other words, the general counsel views that employers that had former employees sign severance agreements months or years ago with overly broad confidentiality and non-disparagement agreements could be subject to an unfair labor practice charge.
The guidance memo also clarified that severance agreements are still, in fact, lawful and enforceable. Even, then, however, the general counsel stretched her opinion to state that overly broad severance agreements beyond employment claims may be invalid. In addition to arguing that the McLaren Macomb ruling covered unsigned agreements offered to employees, the memo stated that any employer who retaliated against a supervisor for refusing to offer a non-compliance severance agreement for an employee to sign would be violating the law. Further, the guidance memo said that its analysis may apply to other provisions in severance agreements, such as non-disclosures, covenants not to sue, and non-compete or non-solicitation clauses.
Next steps for employers
What should employers do in in light of the McLaren Macomb decision and guidance memo? First, employers should realize that the decision could be overruled by an appeals court, and that the guidance memo does not have the effect of law. That said, the decision and memo show the NLRB’s strong pro-employee stance. Second, employers should carefully scrutinize—with legal counsel— the severance agreements they are offering.
Finally, for employers that are particularly cautious, they may want to follow the guidance memo’s recommendations to consider remedying potentially unlawful agreement by contacting former employees and advising them that the severance has overly broad provisions, that they are null and void, and that the employer will not seek to enforce them. In short, severance agreements cannot be seen as copy-and-paste documents, and employers must work through these issues carefully to avoid violating the NLRA.
