The NLRB Prohibits Confidentiality, Non-Disparagement Provisions in Severance Agreements with Non-Managerial Employees

Confidentiality and non-disparagement provisions have become staples in employee severance agreements. Following the National Labor Relation Board’s (NLRB) recent opinion in McLaren Macomb, 372 NLRB No. 58 (2023), these terms may be a thing of the past.

In McLaren Macomb, 372 NLRB No. 58 (2023), the Board examined whether the employer violated Section 8(a)(1) of the National Labor Relations Act (NLRA) by offering severance agreements to a group of permanently furloughed employees. The severance agreements contained terms prohibiting exiting employees from making disparaging statements regarding the employer and prohibiting them from disclosing the terms of their severance agreements. In a stark contrast of prior precedent permitting such terms, the NLRB found these terms unlawful because they interfered with, restrained, and coerced employees in the exercise of their Section 7 rights under the Act. Importantly, the Board found that by conditioning receipt of severance benefits on acceptance of the non-disparagement and confidentiality provisions, the employer violated Section 8(a)(1) of the Act by proffering the severance agreements in the first instance.

The severance agreements at issue in McLaren were drafted as follows:

Confidentiality Agreement. The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.

Non-Disclosure. At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.

To be clear, the McLaren restrictions only apply to non-managerial employees with Section 7 rights under the Act. Section 2(11) of the NLRA defines who qualifies as a “supervisor” (i.e., a manager); that definition hinges on a number of factors, including, but not limited to, whether the employee has authority to hire, fire, discipline, or responsibly direct the work of other employees.

In the wake of this decision, employers should reevaluate their protocol when offering and drafting severance agreements for departing employees. Clyde Snow’s Labor & Employment Group will continue to monitor developments with respect to this decision and advise as to best practices post-McLaren. For more information or any questions, you may contact Clyde Snow’s Labor Group directly.