NLRB General Counsel Issues New Guidance on Separation Agreements

Last month we wrote about a February 21, 2023, National Labor Relations Board (NLRB) decision, McLaren Macomb, which held that overly broad confidentiality and non-disparagement provisions in employee severance agreements violated Section 7 of the National Labor Relations Act (the “Act”). In that decision, the Board concluded that such provisions interfered with non-supervisory employees’ rights to engage in concerted activities relating to employment. The McLaren Macomb decision raised a number of questions that employers have been grappling with since, including whether the decision applies to existing severance agreements as well as whether and how the Act’s six-month statute of limitations would limit liability related to these provisions.

On March 22, 2023, the NLRB General Counsel provided some additional clarity, issuing guidance (the “Guidance”) to Board staff in the form of responses to 15 questions. The NLRB press release noted that General Counsel Guidance does not necessarily represent the Board’s views. However, the Guidance will be implemented by NLRB regional offices to review separation agreements so the General Counsel’s interpretation of McLaren Macomb is noteworthy for employers seeking to navigate this issue.

Here are several key takeaways.

• As a general matter, severance agreements can still be enforceable. The Guidance confirmed that the Board has indeed approved severance agreements where the employee only waived employment claims existing as of the date of the agreement. A severance agreement is unlawful if it includes “overly broad provisions that affect the rights of employees to engage with one another to improve their lot as employees…,” for example, one that prohibits communications outside of the “immediate employee-employer relationship,” such as with third parties (including the media).
• The circumstances surrounding presentation of the severance agreement to an employee are irrelevant if the agreement is unlawful on its face. Simply offering an unlawful agreement is prohibited, so whether the employee actually signed it is also irrelevant.
• Severance agreements with confidentiality or non-disparagement clauses are not unlawful when presented to supervisors. However, the General Counsel mentioned an exception: an employer may not retaliate against the supervisor who refuses to present an unlawful severance agreement to an employee.
• McLaren Macomb applies retroactively subject to, as, the General Counsel acknowledged the six-month statute of limitations. Therefore, a severance agreement offered or entered into more than six months before McLaren Macomb was decided on February 21, 2023, would not be a violation. However, the Guidance states that seeking to enforce severance agreement with unlawful terms would itself violate the Act and would not be barred by the limitations period.
• An unlawful confidentiality or non-disparagement provision does not render the entire severance agreement null and void. The Guidance advises, though, that employers should contact employees who are parties to severance agreements with overly broad provisions to advise that them that those provisions may be null and void and that the employer will not enforce them or pursue penalties for any breach.
• The McLaren Macomb prohibitions apply to any employer communication that may “interfere with, restrain or coerce” an employee. For example, the Guidance indicates that it also applies to pre-employment offer letters that contain these provisions.
• Narrowly-tailored confidentiality provisions are not prohibited, such as restricting use or disclosure of proprietary or trade secret information “for a period of time.” Broader confidentiality provisions that prevent employees from communicating with other employees about workplace issues are unlawful.
• In almost all circumstances, a non-disparagement provision will be unlawful, except to prevent “maliciously untrue” defamatory statements about an employer. That is a high bar to satisfy, and employers will need to be particularly careful in drafting non-disparagement language.
• A “savings clause” informing employees that the agreement is not intended to interfere with Act-protected rights might save an overbroad severance agreement term. However, the Guidance mentions asking the Board to develop (long and detailed) model language that would have to specify up to nine listed rights that employees do not waive.
• Other common severance agreement provisions could also be problematic under McLaren Macomb, including non-solicitation clauses or requirements to cooperate with post-employment investigations.

We will continue to monitor whether and how the NLRB and courts enforce severance agreements based on this General Counsel Guidance and will provide further updates.