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NLRB Bars Confidentiality and Non-Disparagement Provisions in Severance Agreements

On February 21, 2023, the National Labor Relations Board (the “NLRB”) revoked employers’ ability to require their employees to keep the terms of severance packages confidential. The NLRB also bared the incorporation of non-disparagement provisions as a part of severance agreements.

The case, McLaren Macomb, 372 NLRB No. 58, concerned a Michigan hospital that laid off several employees during the COVID-19 pandemic. These employees were presented severance agreements that included confidentiality and non-disparagement provisions. The NLRB held that severance agreements that broadly preclude employees from making statements that could disparage or harm the image of the employer, affiliated entities, parent companies and the directors, officers, employees, agents and representatives of the employer and further precluded employees from disclosing the terms of the agreement to third parties unlawfully restrained rights guaranteed to employees by the National Labor Relations Act (the “Act”). The McLaren ruling overturns two prior decisions which held that such provisions were lawful. The NLRB’s ruling revives settled law that the two prior decisions ignored.

It is important to note that the ruling only applies to employees covered by the Act. The Act does not apply to supervisory employees, with limited exceptions, government employees and independent contractors. This means that severance agreements between employers and these groups of employees are not covered under the Act, and not impacted by the McLaren ruling barring confidentiality and non-disparagement provisions in severance agreements.

Employers who employ workers covered by the Act and want to balance the interests of maintaining confidentially while being compliant with the new rule, should be aware that the severance agreements at issue in McLaren did not contain a disclaimer provision, nor did the NLRB address whether a disclaimer provision would have made the agreements lawful.

For employers who are concerned about liability regarding past severance agreements, it is also important to note that the NLRB’s procedural rules prohibit employees from bringing unfair labor practice charges that fail to relate back to unlawful conduct that occurred within the past six months. This rule effectively limits employer risk and liability for severance agreements within that timeframe and forward. A past employee who attempts to file a charge on a past severance agreement based on the revived rule may be seeking retroactive application of the rule. However, if a severance agreement was executed at a time when confidentiality and non-disparagement provisions were lawful, employers have a potential defense against the charge.

Employers should seek counsel to discuss how the revived McLaren rule may impact the way they craft their severance agreements.

If you have any questions or need more information, please contact PMP.


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