NLRB General Counsel Provides Guidance on Non-Disparagement and Confidentiality Provisions in Severance Agreements

  • NLRB GC memorandum opines on scope of McLaren Macomb decision, in which the Board overturned two decisions that had permitted employers to include confidentiality and nondisparagement provisions in severance agreements.
  • GC explained that severance agreements are not prohibited, limited confidentiality and non-disparagement clauses may still be lawful, McLaren applies retroactively, and disclaimer language is not necessarily a cure-all, among other key issues.

The National Labor Relations Board (NLRB or “the Board”) recently issued a decision in McLaren Macomb, 372 NLRB No. 58 (2023), holding that severance agreements containing overly broad non-disparagement or confidentiality/non-disclosure clauses violate the rights of employees under Section 7 of the National Labor Relations Act (NLRA). In the weeks since the Board’s February 21 decision in McLaren, employers have been struggling to understand the breadth of the decision and how it affects the agreements they have entered into, or plan to enter into, with employees.

On March 22, 2023, NLRB General Counsel (GC) Jennifer Abruzzo issued Memorandum GC 23-05 (the “Memorandum”), in which she provides guidance on the decision’s scope in answering a number of inquiries related to the decision. This guidance is directed to the Board’s regional offices to assist the “Regions in responding to inquiries from workers, employers, labor organizations, and the public about implications stemming from that case.”  The Memorandum is helpful in understanding the Board’s enforcement efforts related to severance agreements.  It bears emphasis, though, that McLaren has not worked through the appeal process and, thus, there may be further direction from the courts on this issue, which might not necessarily dovetail with the GC’s interpretation.

Memorandum GC 23-05

The Memorandum is in a question-and-answer format, which is helpful for those reviewing it. Certain notable paragraphs that should be considered carefully include:

  • Severance agreements are not prohibited. GC Abruzzo affirmatively states that 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.”  Of course, this raises the question – what will the Board consider lawful?  This statement does, however, leave the door open for employers to craft severance agreements that fall within the confines of McLaren.
  • Limited confidentially and non-disparagement clauses may still be lawful. The Memorandum states that 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” are lawful. It bears noting, however, that the Memorandum points out that a clause that precludes employees from communicating with the NLRB, a union, a legal forum, the media or other third parties are unlawful.  Notably, GC Abruzzo stated that OM 07-27 remains in effect.  In OM 07-27, which involved Non-Board Settlements, the Office of the GC held that a confidentiality clause that prohibits an employee from generally disclosing the financial terms of settlement is appropriate.  Thus, it appears that confidentiality clauses that prohibit disclosure of the financial terms of an agreement will still be deemed lawful.

The Memorandum also opines that non-disparagement provisions that are “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” may still be found lawful.

  • The McLaren decision applies retroactively. GC Abruzzo confirmed what we anticipated would be the case—that the Regions will take the position that the McLaren decision applies to even those agreements proffered before the Board issued its February 21 decision. As we previously noted, the six-month statute of limitations should protect employers that proffered these types of agreements more than six months ago.  However, GC Abruzzo stated in the Memorandum that claims related to employers’ maintenance or enforcement of these types of unlawful provisions would not be time-barred.  Perhaps hinting at how the Board might resolve such a charge if filed, GC Abruzzo noted that Regions have settled cases involving unlawful severance agreements by requiring the employer to notify its former employees that the overbroad provisions no longer applied. Moreover, GC Abruzzo stated that employers should consider remedying any such violation by contacting employees subject to agreements with overly broad provisions and advising them that those provisions are void and that the employer will not seek to enforce them or pursue any penalties for violations thereof. Thus, employers have to consider whether taking this ultra-conservative approach to avoid a potential claim is appropriate.
  • Agreements should not be found to be void in their entirety because they include unlawful provisions. The Memorandum states that Board will generally seek to void only those provisions it determines to be unlawful, instead of voiding the entire agreement.  Indeed, GC Abruzzo opines that this is true even in situations where the agreement does not include a severability clause.
  • Overly broad confidentiality or non-disparagement provisions are unlawful no matter who requests them. The Memorandum provides that even where an employee requests that an agreement include broad confidentiality or non-disparagement provisions (which the GC indicated would be “an unlikely scenario”), the provisions would still be unlawful because, in the GC’s view, “the Board protects public rights that cannot be waived in a manner that prevents future exercise of those rights regardless of who initially raised the issue.” This guidance conflicts with certain state “MeToo” laws designed to protect employees by giving employees the right to request confidentiality and/or non-disparagement provisions to shield their identity or circumstances, particularly in cases of sexual harassment. 
  • Disclaimer language is not necessarily a cure-all. GC Abruzzo somewhat skirted this issue in opining that, “[w]hile savings clause of disclaimer language may be useful to resolve ambiguity over vague terms, they would not necessarily cure overly broad provisions.” GC Abruzzo then set forth the types of terms an employer should reference in what she described as a “prophylactic statement of rights” to potentially include in a severance agreement in an attempt to mitigate the risk of including confidentiality and/or non-disparagement provisions.
  • The McLaren decision could apply to agreements proffered to supervisors in limited circumstances. While supervisors are generally not protected by the Act, GC Abruzzo pointed out that supervisors are protected to the extent they are retaliated against as a result of their refusal to act on their employer’s behalf in committing an unfair labor practice, such as if the supervisor refused to offer an unlawful separation agreement to an employee.  GC Abruzzo, therefore, opined that if an employer proffers a severance agreement to a supervisor in connection with this refusal, proffering that agreement could also be unlawful under McLaren.

The Memorandum also provides that there are other provisions potentially included in a severance agreement that the NLRB might find “problematic,” including noncompete clauses, no-solicitation clauses, no-poaching clauses, broad liability releases, covenants not to sue, and/or provisions requiring employee cooperation in any current or future investigation or proceeding.

The Takeaway

While the majority of Memorandum GC 23-05 is not unexpected, it does provide GC Abruzzo’s opinion on answers to some questions lingering in the minds of employers.  Questions remain, however. For example, the GC did not answer directly whether McLaren applies to other types of agreements, such as settlements of claims (though it is safe to assume it does apply), or how the NLRB will treat agreements with other agencies, such as the EEOC, or under state “MeToo” laws that might not conform to McLaren. Of course, it bears emphasis that this is simply the GC’s opinion, and not the law. That being said, it is a clear guide as to how the Board is going to apply and interpret McLaren, which will be critical in the decisions employers have to make on this issue going forward.    

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.