NLRB Memo Reaffirms Commitment to McLaren Macomb Decision Prohibiting Non-Disparagement and Confidentiality Provisions in Severance Agreements
On February 21, 2023, the National Labor Relations Board (NLRB) announced its decision in McLaren Macomb, concluding that an employer violated the National Labor Relations Act (NLRA) when it offered permanently furloughed employees severance agreements conditioned on the employees’ acceptance of broad non-disparagement and confidentiality provisions. After this decision, the NLRB’s General Counsel provided further guidance to employers.
What did the McLaren Macomb Decision Do?
This decision reverses the NLRB’s position on severance agreements that had been followed since the Trump administration and overturned the NLRB’s Baylor and IGT decisions, which allowed for the inclusion of non-disparagement and confidentiality provisions as a condition of severance. To violate the NLRA under these Trump-era decisions, there must have also been coercive circumstances accompanying, concerning, or included as a part of the agreement.
In overturning the prior NLRB decisions, McLaren Macomb returned to the NLRB’s traditional approach of finding general confidentiality and non-disparagement provisions in a severance agreement to violate the NLRA if the language of the provisions may chill the exercise of employees’ protected NLRA rights regardless of any other coercive circumstances.
Following this decision, employers were left wondering what effect this decision had on their ability to include standard confidentiality and non-disparagement provisions in their severance agreements.
NLRB Guidance Memo Regarding the McLaren Macomb Decision
As a result of employers’ confusion concerning the McLaren Macomb decision, the NLRB General Counsel issued a memorandum (the Memo) to the NLRB’s field offices. While the Memo does not represent the official views of the NLRB, it provides essential guidance about the future enforcement of the McLaren Macomb decision and answers common employer questions.
Employers should be aware of the guidance provided in the Memo and consult legal counsel regarding potential revisions to severance documents considering the following:
With respect to retroactivity, the General Counsel stated that “[NLRB] cases are presumed to be applied retroactively and [the McLaren Macomb] decision has retroactive application.” The Memo further clarified that an employer’s attempt to maintain or enforce a previously entered severance agreement with overly broad confidentiality or non-disparagement language constitutes a continuing violation which would not be time-barred by the standard statute of limitations. Accordingly, existing severance agreements with confidentiality and/or non-disparagement agreements are subject to attack by the NLRB.
Surrounding Circumstances Irrelevant:
The Memo affirmed the reasoning behind the McLaren Macomb decision, noting that “an employer can have no legitimate interest in maintaining a facially unlawful provision in a severance agreement, much less an interest that somehow outweighs the Section 7 rights of employees.” According to the Memo, because an employer “can have no legitimate interest” in enforcing these provisions, the circumstances surrounding the drafting of these agreements is irrelevant.
Who Is Covered by the Ruling:
Importantly, the McLaren Macomb decision and Memo purport to enlarge the applicability of the NLRA to certain supervisors. Generally, supervisors are exempt from the protections of the NLRA and therefore exempt from this ruling. However, the Memo reaffirms that under existing precedent, the NLRA does protect supervisors from retaliation based on a refusal to violate the NLRA on behalf of their employer. Thus, the Memo clarifies that employers violate the NLRA if they retaliate against a supervisor who refuses to provide an employee with a violative, overbroad severance agreement.
What are the practical implications for employers going forward?
Employers should be aware of the McLaren Macomb decision and relevant guidance contained in the General Counsel’s Memo and then confer with counsel to ensure that they take steps to mitigate their liability under the NLRA. Specifically, employers need to ensure that they limit their confidentiality and non-disparagement provisions in any severance agreement (for non-supervisory employees) to ensure that those limitations comply with this ruling and protect employees’ rights.