Employee severance agreements consist of an exchange of promises between the employer and employee. The core of the agreement is the employer’s promise of some benefit – often a monetary payment – to the employee, in exchange for the employee’s promise to release potential legal claims against the employer. Buried in the written terms of these agreements, you will consistently find two additional terms: (1) prohibiting the employee from sharing the terms of the agreement and the fact that an agreement was reached; and (2) a clause prohibiting the employer from disparaging, saying something negative about, the employer. For most employees, these confidentiality and non-disparagement clauses are no longer enforceable.
Recent Ruling Reverses Course
Earlier this year, in McLaren Macomb, 372 NLRB No. 58 (2023), the National Labor Relations Board (“NLRB”) reversed course and held that employers are prohibited from requiring employees to agree to non-disparagement or confidentiality language as part of a separation agreement. Additionally, the NLRB clarified that an employer violates the National Labor Relations Act (“NLRA”) by merely proposing such terms. In a press release, the NLRB explained:
that simply offering employees a severance agreement that requires them to broadly give up their rights under Section 7 of the [NLRA] violates Section 8(a)(1) of the Act. The Board 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.
Understanding NLRB’s Interpretation of the Ruling
Following the McLaren Macomb decision, NLRB General Counsel Jennifer Abruzzo issued Memorandum GC 23-05, providing guidance on the NLRB’s interpretation and application of the decision. In her memorandum, Abruzzo noted that the McLaren Macomb decision applies retroactively – meaning, it applies to both future and past separation agreements. Though employees only have 6 months to assert a violation of the NLRA, Abruzzo clarified that, regardless, an employer’s attempted enforcement of a now invalid confidentiality or non-disparagement clause would constitute an unfair labor practice. On that point, Abruzzo also clarified that the presence of an invalid confidentiality or non-disparagement clause would not generally void the entire agreement between the employer and employee, but only the offending clauses of the agreement, even if the agreement does not have a severability clause.
Abruzzo stated that employers can still enforce confidentiality clauses that are narrowly tailored to protect proprietary or trade secret information, as well as clauses that keep employees from sharing the financial terms of an agreement.
The McLaren Macomb opinion, like the NLRA in general, applies to non-management employees, regardless of their union status. Furthermore, while Abruzzo’s memorandum explains the NLRB’s position on these issues, McLaren Macomb’s impact will likely be settled in further legal proceedings.
Legal Support for Confidentiality Clause Concerns
If you have questions about your employer’s purported confidentiality or non-disparagement restrictions, please contact our team and we would be happy to advise you on these issues.
