In a recent decision issued in late February 2023, the National Labor Relations Board (“NLRB”) held that the “mere proffer” of severance agreements with broad non-disparagement and confidentiality provisions violate the National Labor Relations Act (“NLRA”). In McLaren Macomb, the employer-hospital provided severance agreements to 11 furloughed employees; [1]. the severance agreements contained the following provisions:
- 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.
McLaren holds that both of the above fairly standard provisions have the tendency to “chill” employees’ rights under Section 7 of the NLRA. Protected conduct under Section 7 includes employees’ rights to talk with co-workers about wages, benefits or other working conditions, and rights to talk to the government or the media about problems in the workplace. Employees in both unionized and non-unionized workplaces have Section 7 rights.
The NLRB’s decision found the above confidentiality provision unlawful in part because it would prohibit the employees from discussing the terms of the severance agreement with former coworkers. The non-disclosure provision was found to be unlawful in part because it prohibited employees from making any statements to the media, the NLRB, or other government agencies about any potential unlawful workplace conditions.
Importantly, employers may generally still use such provisions in agreements with supervisory or managerial employees, because those employees do not have Section 7 rights. Keep in mind that assessing whether an employee is a supervisor under the NLRA may be a fact-intensive inquiry.
For agreements with non-managerial/supervisory employees, employers may still enter into agreements to protect confidential proprietary information and trade secrets, but keeping the terms and conditions of the agreement itself confidential will generally not be permissible. Additionally, broad non-disparagement provisions should be narrowed in accordance with prior NLRB precedent, which permits the prohibition of statements that are “knowingly false or made with reckless disregard for the truth.”
The McLaren decision is still subject to appeal, but employers should act now to review not only their severance agreements, but other common employment agreements that may contain language that runs afoul of the NLRB’s ruling. Moving forward, employers may need to consider narrowing the extent of their confidentiality and non-disparagement clauses for non-managerial/supervisory employees.
Winthrop & Weinstine continues to monitor the situation, and we will provide updates on this topic if the NRLB General Counsel provides advisory memoranda with more specific guidance. For more information about employment agreements, including severance agreements, please feel free to reach out to any member of our Employment Counseling team.
[1] 372 NLRB No. 58 (2023)
