The General Counsel of the National Labor Relations Board (NLRB), Jennifer A. Abruzzo, issued guidance on March 22, 2023, about the NLRB’s McLaren Macomb, 372 NLRB No. 58, decision from February 21, 2023, which reinstated a limit on the confidentiality, non-disclosure, and non-disparagement clauses that employers may include in severance agreements with most of their lower-level employees.[1]  While not law, the General Counsel’s guidance is intended to address the uncertainty among employers regarding what language is deemed acceptable to include in severance agreements and what language may create liability under the National Labor Relations Act (NLRA) following McLaren Macomb.[2]

The McLaren Macomb decision specifically held that employers may not condition severance on the employee’s waiver of rights protected by the NLRA and that agreements between employers and employees that restrict employees from engaging in activity protected by the NLRA or from filing unfair labor practice (ULP) charges with the NLRB, helping other employees in doing so, or assisting during the Agency’s investigatory process are unlawful. The NLRB observed 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 in the agreement. It also provided that the conduct of an employer is irrelevant to assessing the lawfulness of a severance agreement, and the plain language of the severance agreement alone can constitute a violation.  While the Maclaren Macomb decision has been described as a return to the standard applied in earlier cases, many speculate that it indicates that the NLRB intends to take a broader view of how severance agreements infringe on employees’ rights under Section 7 of the NLRA.

The General Counsel’s guidance makes clear that the NLRB intends to invalidate overbroad provisions in severance agreements that attempt to restrict the rights of departing employees to engage in activity protected by the NLRA.  The General Counsel’s guidance also applies the rule retroactively; thus, employers attempting to enforce old severance agreements will face new ULP liability even if the statute of limitations has run since the execution of the now-unlawful agreement.  The General Counsel’s guidance specifically provided:

• Lawful severance agreements may continue to be proffered, maintained, and enforced if they do not have overly broad provisions that affect the rights of employees to engage with one another to improve their lot as employees. This is true regardless of who requests the overbroad provisions.
• Surrounding circumstances do not matter when objectively analyzing whether a provision is facially lawful or not; an employer can have no legitimate interest in maintaining a facially unlawful provision in a severance agreement.
• Whether or not the employee actually signed the severance agreement is irrelevant for purposes of finding a violation of the NLRA; that the employee did not sign the agreement does not render the employer’s conduct lawful.
• Supervisors are generally not protected by the NLRA; but are protected from retaliation for refusing to act on their employer’s behalf in committing an unfair labor practice against employees.
• The NLRB will seek to have unlawful provisions declared void as opposed to the entire severance agreement, regardless of whether there is a severability clause or not.
• While specific savings clause or disclaimer language may be useful to resolve ambiguity over vague terms, they would not necessarily cure overly broad provisions; the employer may still be liable for any mixed or inconsistent messages provided to employees that could impede the exercise of their rights.

The General Counsel specifically identified the following provisions as potentially problematic: confidentiality, non-disclosure, and non-disparagement provisions; non-compete clauses; no solicitation clauses; no poaching clauses; broad liability releases and covenants not to sue that may go beyond the employer and/or may go beyond employment claims and matters as of the effective date of the agreement; cooperation requirements involving any current or future investigation or proceeding involving the employer as that affects an employee’s rights.  However, the General Counsel’s guidance suggested that the following are likely lawful:

• Confidentiality clauses that are narrowly-tailored to restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications;
• Confidentiality clauses prohibiting disclosure of the financial terms of the agreement;
• Narrowly-tailored, justified, non-disparagement provision that is limited to employee statements about the employer that meet the definition of defamation as being maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity.

Employers should pay close attention as this guidance indicates the position the General Counsel will take in prosecuting allegedly unlawful severance agreements Employers should review their severance and separation agreements and discuss with legal counsel whether that language should be modified. Employers should also consider whether they will seek to enforce non-disparagement and confidentiality language in pre-existing agreements in light of the General Counsel’s guidance.

[1] Supervisors, management and executive personnel are excluded from such coverage and employers need not change severance agreements for this group of employees.

[2] Press Release, Board Rules that Employers May Not Offer Severance Agreements Requiring Employees to Broadly Waive Labor Law Rights, National Labor Relations Board (Feb. 22, 2023), https://www.nlrb.gov/news-outreach/news-story/board-rules-that-employers-may-not-offer-severance-agreements-requiring.