E-ALERT: NLRB GC Issues Guidance Memo Regarding Severance Agreement Provisions

The National Labor Relations Board (NLRB) issued a decision on February 21, 2023 (McLaren Macomb, 372 NLRB No. 58), returning to precedent, holding that employers violate the National Labor Relations Act (NLRA) when they merely offer employees severance agreements that have a “reasonable tendency to interfere with, restrain, or coerce the exercise of employee rights under Section 7 of the Act.” Following the decision, NLRB General Counsel Jennifer Abruzzo (GC) issued a memo highlighting the practical impact of the ruling on March 22, 2023. The bottom line is that severance agreements may no longer contain overly broad language that prohibits or restrains an employee from engaging in Section 7 activity, regardless of the employer’s interests or rationale.

Not only does the decision affect severance agreements but it also can affect pre-employment or offer letters the GC stated in her memo. Overly broad language in any communication or agreement that interferes with, restrains, or coerces employees’ exercise of Section 7 rights would be unlawful if not narrowly tailored to address a specific circumstance justifying such.

The memo also clarified that circumstances surrounding a severance agreement are no longer relevant as is whether or not the employee even signed the agreement. Put another way, the mere proffering of the agreement, alone, is unlawful. Further, it is irrelevant if employees themselves request such broad confidentiality and/or non-disparity clauses.

Despite these new limitations, not all severance agreements will be deemed unlawful. Severance agreements may continue to be proffered and enforced if they do not contain overly broad language that affects employee(s) rights to do things like access the Board, a union, the media or third parties. Confidentiality clauses and non-disparagement provisions may also be lawful if they are narrowly tailored and justified. Confidentiality clauses must be limited to proprietary or trade secret information for a period of time based on legitimate business justifications, and non-disparagement provisions must be limited to employee statements about the employer that rises to the standard for defamation. An employer may not merely prohibit the employee from making public comments that may disparage or harm the employer’s image.

It is also important to note that the GC will apply this decision retroactively. The GC stated that maintaining or enforcing a previously entered severance agreement with unlawful provisions qualifies as a continuing violation, not time barred by Section 10(b). On top of that, agreements containing a savings clause or disclaimer language are not automatically remedied by inclusion of such provisions. Finally, the GC also hinted at additional severance agreement provisions that may likely come under attack such as non-compete clauses, no solicitation clauses, no poaching clauses, broad liability releases and covenants not to sue.

This guidance is concerning for all employers as the McLaren Macomb case applies to provisions in severance agreements in both union and non-union workplaces, as well as past and future severance agreements with confidentiality and non-disparagement provisions. As such, it may be time to re-evaluate your standard agreements.

If you have questions concerning these recent changes, please feel free to contact one of our labor and employment attorneys by calling (501) 371-9999.