Severance Agreement Provisions Further Scrutinized in New NLRB Guidance Following McLaren Macomb Decision

By: Tiara Quintana , Daniel J. McCoy

As we reported last month, the National Labor Relations Board (NLRB) struck down broad confidentiality and non-disparagement provisions in severance agreements in McLaren Macomb, 372 NLRB No. 58, finding such provisions to be unlawful because they conflicted with employees’ rights under Section 7 of the National Labor Relations Act (NLRA). On March 22, 2023, NLRB General Counsel Jennifer Abruzzo published Memorandum GC 23-05 (the Memo), providing guidance on the scope of the McLaren Macomb decision and opining on related inquiries. Below are highlights from the Memo:

  • Severance agreements are not banned. Even if a severance agreement contains overbroad confidentiality and/or non-disparagement provisions, the inclusion of such provisions will not generally render the entire agreement (including the release) null and void.
  • Lawful confidentiality and non-disparagement provisions are limited to prohibitions on unlawful conduct. Specifically, the Memo greenlights non-disparagement provisions that seek to prohibit defamatory conduct only and further explains that confidentiality provisions may be lawful if they are narrowly tailored to restrict the dissemination of proprietary or trade secret information for a limited duration.
  • Overbroad provisions violate the NLRA even if a departing employee does not sign the severance agreement or requests that the overbroad provisions be included.
  • The McLaren Macomb decision is retroactive; therefore, General Counsel Abruzzo advises employers to notify former employees who entered into severance agreements with overbroad provisions that such provisions are null and void and the employer will not seek to enforce them.
  • Severance agreements with supervisors may potentially violate McLaren Macomb if an employer retaliates against the supervisor for failing to proffer an overbroad severance agreement and then requires such supervisor to enter into a severance agreement prohibiting them from participating in a NLRB proceeding. Supervisors are otherwise not subject to these limitations.
  • A savings clause or disclaimer will not preclude a violation of the NLRA where confidentiality, non-disparagement or other provisions are deemed unlawfully overbroad.
  • Other employment-related agreements and severance provisions may violate the NLRA. The Memo suggests that the NLRB will be looking at offer letters, confidentiality agreements and other agreements entered into during the course of employment that may include overbroad provisions that interfere with employees’ Section 7 rights. The Memo also flags non-competition, non-solicitation and no poaching provisions as well as broad liability releases contained in severance agreements as potentially “problematic” under the NLRA.

The Memo does not constitute binding law; it is merely the NLRB General Counsel’s opinion. Nevertheless, it lays bare the NLRB’s distaste for non-disparagement and confidentiality provisions in general, and confirms that, even with the inclusion of broad and clear language that preserves Section 7 rights, there is no guarantee that such provisions will be upheld. With the assistance of counsel, employers should (1) assess the pros and cons of retaining such provisions and contacting former employees who signed overbroad agreements, and (2) implement forms revisions consistent with their legal risk tolerance and business need.