March 3, 2023
There have been many articles in legal journals and in mainstream media discussing the recent National Labor Relations Board (NLRB) decision in McLaren Macomb (decided Feb. 21, 2023) finding that the terms of a severance agreement which imposed broad confidentiality and non-disparagement terms violated the National Labor Relations Act (NLRA). Over the past couple weeks, clients have been asking us about the impact of the decision on the severance agreements they currently use. We’ve closely examined the decision to better understand where changes may be required.
Foremost, the decision does not apply to all severance agreements. It is important to understand that the NLRA protects only workers qualifying under the Act’s definition of “employee.” This excludes legally recognized managerial employees, supervisors, independent contractors, public sector employees, agricultural laborers, domestic service workers of any family or person at their home, individuals employed by a parent or spouse, and individuals employed by an employer subject to the Railway Labor Act. These classes of employees do not have Section 7 rights under the NLRA.
As a practical matter, employers should also keep in mind that employees who part on good terms or who are satisfied with the severance package or settlement agreement are less likely to malign former employers. Most employers do not attempt to enforce non-disparagement provisions except in the most egregious of cases. Inclusion of overreaching non-disparagement provisions only serves to potentially create resentment where none is necessary.
With regard to confidentiality, the Board did not prohibit confidentiality clauses as a whole; whether a confidentiality clause passes muster depends on it being narrowly and carefully tailored. Employers will no longer be able to keep the existence of a severance agreement or the details of its terms and conditions confidential and confidentiality provisions which prohibit employees from filing or supporting administrative charges with government agencies are unlawful. However, a more carefully tailored confidentiality provision which simply limits recovery from such a process may still be permissible as would confidentiality provisions seeking to continue to protect trade secrets or proprietary information.
In addition, although certain activities remain protected and violative of the law, the Board repeatedly cited precedent holding that Section 7 does not protect an employee’s making communications that are disloyal, reckless, or maliciously untrue after termination of the employment relationship. Former employers remain free to pursue these types of harmful statements.
Consistent with past decisions invalidating the waiver of statutory investigations, we have already recommended that employers include a clause in their severance agreements which essentially states that the agreement does not prohibit an employee from filing a charge with or participating in any investigation undertaken by a government agency, provided the employee waives any rights to recover any money in connection with such a charge or investigation with respect to any of the claims released.
If you are considering offering severance, please contact RKW to discuss your available options and make sure your agreement and process remains compliant and enforceable in light of this recent development.