Ivo is a partner in Obermayer’s Labor Relations & Employment Law Department. He focuses his practice on representing employers, including advising companies on how to handle employee issues, and defending employee claims...Read More by Author
The Crackdown Continues – The NLRB Clarifies the Status of Severance Agreements After McLaren
As previously covered by HR Legalist, the National Labor Relations Board’s (“NLRB”) recent decision in McLaren v. Macomb ushered in a significant crackdown on non-disparagement and confidentiality provisions in employee severance and separation agreements. This case continues the recent trend of cases reversing employer-friendly decisions of years past and creating a paradigm shift in the labor relations playing field. While the decision made clear that the Board was targeting overbroad restrictions prohibiting employees from participating in Board proceedings or speaking out about workplace issues, it was silent on exactly what types of contract language would be considered illegal. Now, the Board’s General Counsel (GC) has issued a “guidance” Memorandum (GC 23-05) in response to the many questions raised by the McLaren decision.
While this most recent GC Memo provides more direction, there isn’t a whole lot of good news for employers. Here are some of the key points (which are sure to be quite controversial to management-side employment lawyers):
- Whether or not an employee actually signs a severance agreement is irrelevant – even offering an employee or former employee an overbroad agreement can be a violation of the National Labor Relations Act (the “NLRA”);
- While supervisors are generally not afforded coverage under the NLRA, agreements preventing a supervisor from participating in NLRB proceedings could also be unlawful;
- Simply “maintaining” a severance agreement (or similar agreements, such a standard employment discrimination settlement agreement) with overbroad provisions could be a violation – even if the agreement itself pre-dates McLaren’s February 21, 2023 publication date (yes, retroactive application is in play). According to the Memo, the only way for employers to cure this is to notify former employees that any overbroad provisions in their agreements no longer apply;
- Agreements with overbroad provisions need not be nullified in their entirety. The Board’s regional offices can excise only the overbroad or unlawful provisions;
- Employees cannot waive their rights to engage in protected conduct under Section 7 of the NLRA (and therefore cannot request or consent to overbroad language);
- Narrow confidentiality clauses that only protect proprietary information and trade secrets may be considered lawful;
- Puzzlingly, the Memo suggests that confidentiality clauses that only protect financial terms (such as the severance amount itself) are acceptable—but limits this observation to a footnote discussing non-Board settlements (where employees, employers, and unions settle pending labor charges subject to NLRB approval). Thus, it remains unclear whether settlement amounts can be deemed confidential in other circumstances (such as a typical severance agreement where no charges are pending);
- Non-disparagement clauses are sufficiently narrow if they are limited to statements that meet the legal definition of defamation (i.e. statements that are maliciously untrue). In effect, agreements can only prohibit conduct that already violates the law;
- While a “savings clause” can be helpful to resolve ambiguity over vague terms, employers are still responsible for “mixed or inconsistent messages” in their agreements. The GC suggests a nine-point list specifying what types of activities are protected under the Act—a level of detail not often found in pre-McLaren agreements. Many of the listed activities (such as forming, joining, or assisting a union; talking about union issues or distributing union literature in parking lots or break rooms; raising work-related complaints with an employer; striking and picketing; taking photographs or other recordings in the workplace to document working conditions; and wearing union apparel at work) apply primarily to current—not former—employees.
- Incredibly, the GC believes that other provisions, such as non-compete, non-solicitation, and “no poaching” clauses, could also violate the Act. Notably, non-compete agreements are already under fire due to pending rulemaking from the FTC.
While General Counsel memos are guidance and do not have the same force of law as Board decisions (and the Board may never review every agreement presented to employees and former employees), employers and their counsel must be mindful of these aggressive new requirements when drafting and enforcing severance agreements.
The information contained in this publication should not be construed as legal advice, is not a substitute for legal counsel, and should not be relied on as such. For legal advice or answers to specific questions, please contact one of our attorneys.