On February 21, 2023, the National Labor Relations Board (“the Board”) decided McLaren Macomb, a case where a hospital offered severance pay to eleven permanently furloughed employees in exchange for the employees agreeing to sign a severance agreement. The severance agreements contained provisions that prohibited the signing employees from making disparaging or harmful statements about the hospital and further restricted the employees’ ability to disclose the provisions of the separation agreement.

The Board found both the non-disparagement provision and confidentiality provision unlawful under Section 8(a)(1) of the National Labor Relations Act (“the Act”) because these provisions violated the employees’ Section 7 rights. For those not well versed in the Act, Section 8(a)(1) makes it an unfair labor practice to interfere with an employee’s Section 7 rights and Section 7 protects employees’ rights to engage in protected and concerted activities.

Specific to the non-disparagement provision, the Board criticized the breadth of the language prohibiting any “statements to [the] Employer’s employees or to the general public which could disparage or harm the image of [the] Employer” and that the language was not limited to only include the employee’s past employment with the hospital. The Board further took issue with the fact that “disparagement” was not defined in the agreement, and the provision included the hospital’s “parents and affiliated entities and their officers, directors, employees, agents and representatives”. The provision also did not identify a time limitation for adherence to the obligation. The Board found that this provision would create a chilling tendency, not only among the employees who signed the agreement, but among the hospital’s current employees as well.

Similarly, the Board found the confidentiality provision to be too broad. The provision prohibited disclosure to “any third person”, and the Board took that to mean the agreement would prohibit the employees from disclosing to anyone that the agreement contained unlawful provisions, and would further prohibit them from to discussing the terms of their agreement with other coworkers, should those coworkers ever find themselves in a similar situation and call the former employees for guidance in navigating the agreement.

GC Memorandum

On March 22, 2023, the Board’s General Counsel (“GC”) released Memorandum GC 23-05 which purported to clarify McLaren Macomb. The memorandum sets forth several relevant items for employers. First, the memorandum specifies that the McLaren Macomb standard will be applied retroactively to agreements entered into before February 21, 2023. The GC also stated that non-disparagement provisions that are narrowly tailored, justified, and limited to employee statements about the employer that meet the definition of defamation may be found to be lawful, however, savings language would not necessarily cure overly broad provisions. The GC suggested that employers refer to a past Board decision and include in agreements examples of what types of actions by employees would not be prohibited by the agreement.

What this means for employers

On the one hand, employers should be aware of this decision and consider its implications when entering separation agreements. Specifically, employers should consider this decision when evaluating agreements for nonmanagerial employees—both future agreements and agreements which they have entered into with employees in the past. Managers and supervisors generally cannot claim Section 7 rights under the National Labor Relations Act[1], and accordingly, separation agreements for those categories of employees should not be impacted assuming that all employees are properly classified.

Additionally, the Board’s decision in McLaren Macomb and position in GC 23-05 are not limited to separation agreements. Employers should review all agreements which contain non-disparagement and confidentiality provisions as they relate to standards defined in the National Labor Relations Act.

It is also worth noting that Board precedent often reverts to prior precedent when administrations change. Meaning that should the 2024 election result in a change in leadership in Washington, the Board’s tenor towards non-disparagement and confidentiality provisions may change. In the meantime however, employers should revisit their standard employment agreements to ensure all provisions are compliant with these new developments.