News & Insights

NLRB General Counsel Issues Guidance On Non-Disparagement And Confidentiality Provisions In Severance Agreements

The National Labor Relations Board (“NLRB”) recently issued a decision in McLaren Macomb, 372 NLRB No. 58 (2023), holding that severance agreements containing overly broad non-disparagement or confidentiality clauses violate the rights of employees under the National Labor Relations Act (“NLRA”), Section 7. The NLRB held that such clauses interfere with employees’ rights to assist co-workers or former co-workers with workplace issues and communications with others about their employment. In the weeks following the NLRB’s decision, employers have had several questions regarding the implications of this decision and how it affects the agreements they have entered into, or plan to enter into, with employees.

On March 22, 2023, NLRB General Counsel, Jennifer Abruzzo (“Abruzzo”), issued Memorandum GC 23-05 (the “Memorandum”) to provide guidance on the decision’s scope. This guidance is directed to the NLRB’s regional offices to assist in responding to inquiries from workers, employers, labor organizations, and the public about implications stemming from the decision.

While the Memorandum takes an expansive view of the NLRB’s recent decision, it contains several helpful takeaways. The Memorandum confirms that severance agreements are not prohibited as long as they do not have overly broad provisions that “affect the rights of employees to engage with one another to improve their lot as employees”. It states that entire agreements will not be void, but only the provisions found unlawfully broad. The Memorandum explains that limited confidentiality and non-disparagement clauses may still be lawful given that they are “narrowly-tailored to restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications”.

The Memorandum also states that the McLaren decision applies retroactively. As such, the decision applies to those agreements entered into before the NLRB issued its decision. While the six-month statute of limitations should protect employers that entered into these types of agreements more than six months ago, it was also stated that claims related to employers’ maintenance or enforcement of these types of unlawful provisions would not be time-barred. Abruzzo recommended that employers should consider remedying any violations by contacting employees subject to agreements with overly broad provisions to advise them that those provisions are void and they will not seek to enforce them.

While the Memorandum has provided some helpful guidance, there are still some lingering questions as to the application of this decision. Neither the decision nor the Memorandum has defined what would be considered “narrowly tailored”. Further, there is no mention as to what penalties employers may face if the NLRB finds certain provisions of their agreements unlawful. Employers should keep themselves apprised of the ongoing analysis of this decision as it is interpreted by the NLRB and the Courts to ensure their severance agreements comply with the NLRB’s decision.