NLRB General Counsel Clarifies Enforcement Posture on Unlawful Separation Agreement Provisions

By Ufberg & Associates

March 28, 2023

On March 22, 2023, the National Labor Review Board (“NLRB”) issued a General Counsel Memorandum (GC Memo 23-05) providing additional guidance on the NLRB’s recent ruling in McLaren Macomb, 372 NLRB No. 58, which held that inclusion of overly broad non-disparagement and confidentiality clauses in severance agreements are unlawful under the National Labor Relations Act ("NLRA").

The GC Memorandum provides the following clarification regarding the General Counsel’s enforcement posture in the aftermath of McLaren Macomb:

• Severance agreements are lawful and may be offered, maintained, and enforced as long as they do not have overly broad provisions that potentially have a chilling effect on employees’ right to engage in protected Section 7 activities. These activities include theright to self-organize, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.

• Confidentiality and non-disclosure clauses in severance agreements may be lawful as long as they are narrowly tailored to restrict the dissemination of the employer’s proprietary or trade secret information for a period of time and are based on a legitimate business reason. However, the GC Memorandum notes that confidentiality clauses that preclude employees from assisting others about workplace issues and/or from communicating with NLRB, a union, judicial, administrative or legislative forums, the media, or other third parties are unlawful.

• Non-disparagement clauses can be lawful as long as they are narrowly tailored and limited to prohibit statements about an employer that rise to the level of defamation (meaning that the statements must be maliciously untrue, such that the employee made the statements with knowledge of their falsity or with reckless disregard for their truth or falsity). Overly broad non-disparagement clauses are illegal when they encompass all disputes, terms and conditions, and issues, without a temporal limitation, that apply toemployees speaking to parents, affiliates and their offices, representatives, other employees, directors, and agents.

• The GC Memo also points out that the McLaren Macomb ruling could also apply to some other common severance agreement provisions:

   o Release language that goes beyond release of employment claims, or requires releasing claims that arising after the date of the agreement;

   o Non-compete, non-solicitation, and non-poaching clauses; and

   o Cooperation requirements involving any current or future investigation or proceeding involving the employer that affects an employee’s right to refrain under Section 7, such as if the employee was asked to testify against co-workers that an employee assisted with filing an unfair labor practice charge.

• The mere offer of a severance agreement that contains unlawful clauses can be held to violate the NLRA, regardless of whether or not the employee signs it.

• Any agreement, not only severance agreements, between employers and employees that restrict employees from engaging in activity protected by the Act or from filing unfair labor practice charges, helping other employees in doing so, or assisting during an investigatory process are unlawful as well.

Notably, the GC Memo states that the “Surrounding circumstances do not matter when objectively analyzing whether a provision is facially lawful or not”, citing to the McLaren Macomb ruling for the proposition 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.”

On a helpful note, the Memo also clarifies that the inclusion of a single overbroad provision in an agreement would not necessarily void the entire agreement. An employer may be able to remedy a violation by contacting employees who have been offered an agreement that contains an overly broad provision and informing those employees “that the provisions are null and void and that they will not seek to enforce the agreements or pursue any penalties, monetary or otherwise, for breaches of those unlawful provisions.”

Employers should consider working with counsel to review their separation agreements, restrictive covenant agreements, and other employment agreements to determine whether any modifications are necessary in light of the McLaren Macomb ruling and the GC Memo.

If you have any questions about how the NLRB’s ruling, or whether your Agreements comply with the National Labor Relations Act, please call our office. Thank you.

This Client Alert provides a general overview of new legal developments. It is not intended to provide legal advice. If you have questions or would like more information about how these developments may affect your business, please contact us at (570) 341-8800

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