In its recent McLaren Macomb decision,¹ the National Labor Relations Board (NLRB) issued a ruling finding unlawful the type of nondisparagement and confidentiality provisions employers use in severance agreements with their employees. The NLRB also found unlawful the severance agreements that contain such provisions, and declared that merely proposing (or “proffering”) such severance agreements to employees violated federal labor law. In light of the NLRB’s demonstrated antipathy toward such provisions and the agreements that contain them, employers should carefully review their severance agreements—including those used in the context of reductions in force—as well as other employment-related documents that might contain such potentially offensive provisions (including proprietary information agreements). Given the importance of this issue, employers should consult counsel about making any necessary changes.

The NLRB’s Ruling

In McLaren Macomb, the NLRB held that an employer commits an unfair labor practice under the National Labor Relations Act (NLRA) “when it proffers a severance agreement with provisions that would restrict employees’ exercise of their NLRA rights.” According to the NLRB, such an agreement has “a reasonable tendency to restrain, coerce, or interfere with the exercise of Section 7 rights by employees.” As a result, the mere proffering of such an agreement to employees, it said, is unlawful “regardless of the surrounding circumstances.”²

In McLaren Macomb, the NLRB considered the separation agreements that a Michigan hospital presented to a group of laid off employees and determined that the agreements’ confidentiality and nondisparagement provisions interfered with, restrained, or coerced employees’ exercise of their rights under the NLRA. The nondisparagement and confidentiality clauses at issue were as follows: 

Nondisparagement: “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.” 

Confidentiality: “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.” 

The NLRB determined that the mere act of offering agreements with these clauses violates the NLRA, because “[i]nherent in any proffered severance agreement requiring workers not to engage in protected concerted activity is the coercive potential of the overly broad surrender of NLRA rights if they wish to receive the benefits of the agreement.” This is true, the NLRB concluded, whether or not the employee offered the release actually accepts its terms, i.e., signs it, or the company actually attempts to enforce the unlawful provisions.

Nondisparagement Clauses

The NLRB stated that the nondisparagement clause “on its face” substantially interfered with the employees’ Section 7 rights. It represented “a sweepingly broad bar that [had] a clear chilling tendency” on the laid off employees’ ability to freely exercise their NLRA rights. For example, the NLRB concluded that the nondisparagement clause could reasonably be expected to deter employees from freely:

• making public statements about the workplace, including statements that could disparage or harm the employer’s image, or that the employer had violated the law (here, the NLRA) by offering the severance agreement;
• raising complaints about the terms and conditions of their prior employment (including with their union, the NLRB, other government agencies, and the media);
• assisting employees who are still employed in exercising their NLRA rights; and
• cooperating with NLRB investigations and litigation. 

The NLRB also took note of the undefined temporal scope of the nondisparagement clause as well as the breadth of the clause, which covered (in addition to the employer) the employer’s parents and affiliated entities, and their respective officers, directors, employees, agents, and representatives.

Confidentiality and Nondisclosure Clauses

The NLRB similarly concluded that the separation agreements’ confidentiality provisions were unlawful because they too “place[d] a broad restriction on employee protected Section 7 conduct.”

For example, the confidentiality clause prohibited employees from disclosing the terms of the agreement to virtually anyone, and therefore the NLRB held that it would impermissibly preclude an employee from disclosing the existence of unlawful provisions in the agreement, and it would “reasonably tend to coerce the employee from filing an unfair labor practice charge or assisting [an NLRB] investigation into the [employer’s] use of the severance agreement.” As such, the confidentiality provisions constituted an unfair labor practice in violation of the NLRA.

In addition, the NLRB stated that the confidentiality provision could also reasonably be read to prohibit the terminated employees from discussing the severance agreement with their union, as well as to restrain them “from discussing the terms of the severance agreement with [their] former coworkers who could find themselves in a similar predicament facing the decision whether to accept a severance agreement.”  

Key Considerations and Next Steps

• Separation agreements must be carefully drafted. The McLaren Macomb decision does not place an outright ban on nondisparagement and confidentiality provisions in separation agreements. Rather, the NLRB was concerned about potential broad waivers of employee rights under the NLRA. If an employer’s separation agreements contain such broad confidentiality and/or nondisparagement provisions, or other provisions that “tend[] to interfere with the free exercise of employee rights” under the NLRA (e.g., noncooperation, no-rehire clauses, etc.), then employers would be well-advised to revise the agreements in a manner that minimizes the risk of violating the NLRA. The NLRB did not explicitly set forth how separation agreements can be drafted in order to comply with the decision. While the NLRB’s General Counsel may issue further guidance in the future, in the meantime, employers should consult with their employment counsel to evaluate any necessary revisions.
• Broad applicability. The NLRA and the McLaren Macomb decision are not limited to unionized workplaces. With very limited exceptions, virtually all private employers must comply with the NLRA, including as it has been interpreted in McLaren Macomb. And while NLRA rights typically apply only to nonsupervisory employees, the NLRB’s desire to ensure that employees are not precluded from assisting others in exercising their own NLRA rights (as well as the NLRB’s stated belief that it is tasked with safeguarding the integrity of its processes for employees exercising their Section 7 rights) introduces the prospect that agreements offered to supervisory employees could also be subject to scrutiny.
• Impact on other types of agreements. The NLRB’s decision in McLaren Macomb focused on separation agreements, the exact language in those agreements, and the potential broad waiver of NLRA rights found in the nondisparagement and confidentiality provisions at issue. However, it also noted that Section 7 affords protection for employees who engage in communications with a wide range of third parties in circumstances where the communication is related to an ongoing labor dispute and does not run afoul of certain narrow restrictions, i.e., where the communication is not so disloyal, reckless, or maliciously untrue such that it loses protection. In its effort to protect Section 7 rights, therefore, the Board could apply the same principles to other types of employment-related documents, including, for example, offer letters, proprietary information agreements, and employee handbooks. Employers should engage with counsel to review potential updates to the full gamut of their employment agreements and policies in light of this decision.
• Severability clauses. Even agreements that are carefully crafted to attempt to comply with the NLRB’s decision may be subject to scrutiny. Employers should be sure that their agreements contain thoughtfully drafted severability clauses in order to maximize the likelihood that, if provisions are challenged, the NLRB or a court would void only the offending provisions rather than voiding the entire agreement. Employers may also want to discuss with counsel whether properly drafted savings clauses may reduce the risks associated with the use of nondisparagement and confidentiality provisions.

Wilson Sonsini closely follows developments in NLRB precedent and guidance, including with respect to separation agreements and all other types of employment-related documents. Attorneys in the firm’s employment litigation practice are available to discuss or review agreements for compliance with applicable law. 

[1] McLaren Macomb, 372 NLRB No. 58 (2023).

[2] Among other things, Section 7 of the NLRA protects nonsupervisory employees’ rights “to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”