On March 22, 2023, the NLRB's General Counsel issued a Memorandum (the “Memo”) providing guidance on the scope and effect of the National Labor Relations Board’s (the “NLRB”) decision in McLaren Macomb, which found overbroad confidentiality and non-disparagement provisions to be in violation of the National Labor Relations Act (the “NLRA”) and held their mere inclusion in a severance agreement to be an unfair labor practice. (See our recent client alert for a discussion of that decision here.)

While the Memo provides some clarity about questions left unanswered by McLaren, including that a severance agreement containing an overbroad confidentiality or non-disparagement provision will not be held unenforceable in its entirety, it offers employers little comfort that confidentiality and non-disparagement provisions previously deemed “standard” will be found permissible going forward.

Below is a summary of the Memo and the NLRB General Counsel’s current assessment of the legality of confidentiality and non-disparagement provisions in employee agreements. While employers are strongly advised to continue to take note of McLaren and the NLRB's stance on such provisions, it should be noted that the Memo is not legally binding and that McLaren (and with it the NLRB’s position on these matters) remains subject to review by the courts.

Severance Agreements Remain Enforceable, Even With Overbroad Restrictions

The Memo first confirms that McLaren did not ban severance agreements. The Memo separately notes that an overbroad confidentiality or non-disparagement provision in a severance agreement would not render the entire agreement unenforceable. Instead, such overbroad and unenforceable provision would be voided, even if the agreement lacks a severability provision.

Context Is Irrelevant

When analyzing whether a non-disparagement or confidentiality provision unlawfully chills an employee’s exercise of Section 7 rights, the NLRB will look only at the language of the provision and not surrounding circumstances.  As the NLRB reasoned in the Memo, because an employer “can have no legitimate interest in maintaining a facially unlawful provision,” the circumstances surrounding the proffer of the agreement do not matter.  The Memo therefore reiterates the holding in the McLaren decision that the mere proffer of an agreement containing an overbroad confidentiality or non-disparagement provision constitutes a per se violation of the NLRA, regardless of whether the employee ultimately executes the agreement.

McLaren Has Retroactive Effect

The Memo confirms that the McLaren decision has retroactive effect but acknowledges that the proffer of a severance agreement containing an impermissibly broad confidentiality or non-disparagement provision would be subject to the NLRA’s six-month statute of limitations. However, the Memo takes the position that an employer who enforces or maintains (i.e., does not affirmatively void) an overbroad provision in a previously executed severance agreement could be deemed to be engaging in a current violation that would not be time-barred.

(Very) Narrow Confidentiality Provisions May Be Lawful

The Memo concedes that a confidentiality provision could be lawful under the NLRA if it is “narrowly-tailored to restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications.” As the Memo emphasizes, however, confidentiality clauses that “have a chilling effect that precludes employees from assisting others about workplace issues and/or from communicating with the [NLRB], a union, legal forums, the media or other third parties are unlawful.”

(Very) Narrow Non-Disparagement Provisions May Be Lawful

The Memo also concedes that a non-disparagement provision may be lawful under the NLRA, but only to the extent that the provision precludes statements made about the employer that are “maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity.”

A “Savings Clause” May (Possibly) Save An Overbroad Provision

The Memo devotes the most ink to discussing whether a “savings clause” or disclaimer would save an otherwise overly broad confidentiality or non-disparagement provision. Ultimately, the Memo opines that such a clause would “not necessarily cure overly broad provisions” (emphasis added) but “may be useful to resolve ambiguity over vague terms.” The Memo makes clear that an employer would be liable if there were any mixed or inconsistent messages in an agreement that could impede an employee’s exercise of Section 7 rights, and then details a lengthy “model prophylactic statement of rights” that would presumably be sufficient to avoid such ambiguity or inconsistency.

McLaren Standard Applies to All Employment Documents

As noted in our earlier client alert, the Memo confirms that, while the McLaren decision specifically addressed non-disparagement and confidentiality provisions in severance agreements, overly broad restrictions in any employer communication (including offer letters, confidentiality agreements, policies, etc.) would likewise violate the NLRA if they would tend to interfere with employees’ exercise of Section 7 rights.

Agreements With Supervisors Generally Not Impacted By McLaren

The Memo confirms that agreements with supervisors are generally outside the scope of the NLRA such that the McLaren decision does not impact them.  However, the Memo notes a couple of outlier instances where supervisors would be protected by the NLRA and McLaren, such as in a situation where an employer is terminating a supervisor due to their refusal to commit an unfair labor practice on the employer’s behalf.

McLaren May Apply to Other Typical Severance Provisions

The Memo closes with a reminder that the NLRB may view other common severance agreement provisions -- including non-compete/non-solicitation clauses, broad liability releases that cover more than employment claims, covenants not to sue other parties, and investigation cooperation requirements -- as problematic under the NLRA.

Next Steps

While the Memo is not legally binding and represents only the General Counsel's guidance to NLRB field offices, it reflects the NLRB’s aggressive posture towards employee agreements that could be interpreted to interfere with Section 7 rights, and employers are advised to take note and proceed with caution.  Employers should review their current employment documents, carefully consider the breadth of their confidentiality, non-disparagement, and other employee restrictions, evaluate whether such restrictions conflict with the NLRB’s guidance, and determine what changes they may want to make.