Separation Non-Confidential: the aftermath of NLRB’s McClaren decision

Separation Non-Confidential: The continuing viability of confidentiality and non-disparagement provisions in separation agreements in the aftermath of the NLRB’s McClaren Decision

The National Labor Relations Board (NLRB) issued a February 21, 2023 decision titled McLaren Macomb[1] which impacts confidentiality provisions and non-disparagement provisions in employee agreements, including severance agreements.

Severance agreements have become more and more commonplace for employers and employees seeking to enter into an agreement regarding an employee’s separation from employment.  While severance agreements often vary depending on the circumstances, they often provide an employee with a severance payment in exchange for certain promises provided by the separating employee in the severance agreement.  Confidentiality provisions and non-disparagement provisions are amongst the clauses often included in severance agreements.

The scope of confidentiality and non-disparagement provisions came under scrutiny in the NLRB’s McLaren Macomb decision.

The NLRB is charged with enforcing the National Labor Relations Act (NLRA), which provides both current and former employees with certain non-waivable rights.  Section 7 of the NLRA provides employees “the right to… engage in… concerted activities for the purpose of collective bargaining or other mutual aid or protection.”  Furthermore, Section 8 of the NLRA makes it an unfair labor practice for an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7.”

Importantly, the mere act of offering a provision that violates the NLRA is itself an unfair labor practice regardless of whether the employee accepts the offered agreement.

The McLaren decision determined the non-disparagement at issue was overbroad and constituted an unfair labor practice in violation of the NLRA.  The decision noted:

Public statements by employees about the workplace are central to the exercise of employee rights under the Act.  Yet the broad provision at issue here prohibits the employee from making any ‘statements to [the] Employer’s employees or to the general public which could disparage or harm the image of [the] Employer”—including, it would seem, any statement asserting that the Respondent had violated the Act…

The decision noted several other issues with the non-disparagement provision, including its failure to include a temporal limit.  Following the decision, the NLRB’s General Counsel issued a memorandum dated March 22, 2023 – which can be found here and here – explaining that narrowly-tailored, justified, non-disparagement provisions drafted consistent with NLRB precedent may continue to be proposed to employees without violating the NLRA.

The McLaren decision additionally reviewed a confidentiality provision offered by the respondent employer to its separating employees.  The confidentiality provision was also found to constitute an unfair labor practice for several reasons, including, in the Board’s opinion, that the “confidentiality provision would also prohibit the subject employee from discussing terms of the severance agreement with his former coworkers who could find themselves in a similar predicament facing the decision whether to accept a severance agreement.”  The NLRB General Counsel’s memo following the decision clarified that not all confidentiality provisions constitute unfair labor practices.  Instead, confidentiality provisions narrowly tailored consistent with the guidance from the General Counsel and the McLaren decision remain valid.

Employers are encouraged to review all employment agreements in which confidentiality and non-disparagement provisions are included, including, but not limited to severance agreements.  Employers should work with local counsel to properly revise such agreements. 

We will continue to monitor any updates regarding this decision.  NLRB decisions may be appealed to a Federal Circuit Court of Appeals of competent jurisdiction.  The most notable recent disagreement between the NLRB and various Circuit Courts involved the viability of class and collective action waivers in arbitration agreements.  Battle lines on that issue were drawn with the NLRB, and the 6th, 7th, and 9th Circuits agreeing that that the provisions were not enforceable; and the 2nd, 5th, and 8th circuits determining the provision was not enforceable.  The Supreme Court ultimately ruled against the NLRB decision in Epic Systems Corp. v., Lewis.

If you have questions about severance agreements or other employment-related issues please contact Shar Bahmani at bahmani@sackstierney.com  or Katya Lancero at lancero@sackstierney.com

[1] McLaren Macomb, 372 NLRB No. 58.