By Amelia J. Holstrom, Esq.

The National Labor Relations Board (NLRB) dealt a blow to employers use of confidentiality and non-disparagement clauses in severance agreements on February 21. In McLaren Macomb, the NLRB found that an employer’s use of broad confidentiality and non-disparagement clauses in a separation agreement was unlawful under the National Labor Relations Act (NLRA).  The NLRA is applicable to both unionized and non-unionized employees. Significantly, not only did the NLRB determined that the clauses “have a reasonable tendency to interfere with, restrain, or coerce the exercise of employee rights under Section 7 of the [NLRA],” but they also held that the mere inclusion of such broad clauses is, in and of itself, an unfair labor practice charge.

In its decision, the NLRB reasoned that the confidentiality provision was unlawful because it prohibited the employee from disclosing the terms of the agreement, including any unlawful term, to anyone other than a handful of people.  The NLRB determined that such a provision prohibited an employee from reporting unlawful terms to the NLRB or otherwise cooperating in an investigation by the NLRB, in violation of the NLRA.

When it turned to the non-disparagement clause, which prohibited 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,” the NLRB reasoned that the clause seemingly prohibited “any statement asserting that the[Employer] had violated the [NLRA].” The Board found that including such a provision interfered with an employee’s fundamental right under the NLRA to make public statements about the workplace.

One important thing to remember is that the NLRA is only applicable to non-supervisory employees.  As a result, employees in supervisory positions may still be provided with separation agreements that contain broad confidentiality and non-disparagement provisions. But, where do employers go from here for non-supervisory employees?

It depends on an employer’s risk tolerance and the situation. The NLRB made it clear that simply stating that the clauses will not be enforced is not sufficient.  As a result, employers seem to have three options that all come with their own questions, costs, and benefits.

1. Employers can proceed as usual and continue to include the clauses and wait to see if an employee files and unfair labor practice charge as a result.  Employees only have 6 months from the unlawful act to do so. If an individual files an unfair labor practice charge due to the inclusion of the provisions, the employer will have to spend money defending the claim and will likely be found in violation of the NLRA.
2. Employers can narrowly tailor their confidentiality and non-disparagement clauses and include a well-drafted disclaimer regarding an employee’s ability to continue to engage in their rights under the NLRA. This decision did not address whether such steps would be sufficient, and, if they are not, the employer could be faced with an unfair labor practice charge anyway.
3. Employers can remove the confidentiality and non-disparagement provisions, but if they do so, former employees are free to say what they want about the agreement and the employer.

Are employers stuck with this decision for good? Probably not.  First, the decision will very likely be appealed and a court will decide that matter. The court may not agree with the NLRB.  Second this decision overturned a 2020 Trump-era NLRB decision.  If a Republican President is elected in 2024, it is very likely that the NLRB under that President would overturn the McLaren Macomb decision and employers would be free to utilize confidentiality and non-disparagement clauses in severance agreements again.

But, until the makeup of the NLRB changes, additional guidance is issued, or the case is overturned on appeal, employers would be wise to discuss any severance/separation agreement with their labor and employment counsel.