In the wake of the National Labor Relations Board’s recent decision in McLaren Macomb – where the Board held that severance agreements with overly broad confidentiality and non-disparagement provisions violated the rights of employees under Section 7 of the National Labor Relations Act (NLRA) – the NLRB General Counsel (GC) Jennifer Abruzzo issued Memorandum GC 23-05, in which she provided guidance to NLRB field offices about how to interpret McLaren and the “implications” of that decision.
The GC’s Memorandum highlighted a number of important takeaways from the McLaren decision (based on the GC Abruzzo’s interpretation), including the following:
- McLaren does not ban the use of severance agreements. Rather, “lawful severance agreements may continue to be proffered, maintained, and enforced if they do not have overly broad provisions that affect the rights of employees to engage with one another to improve their lot as employees.”
- Employers need to take care to narrowly tailor confidentiality and non-disparagement provisions in severance agreements. GC Abruzzo affirms the use of “[c]onfidentiality clauses [in severance agreements] that are narrowly-tailored to restrict the dissemination of proprietary or trade secret information for a period based on legitimate business justifications,” as well as the use of “narrowly-tailored, justified, non-disparagement provision[s] . . . limited to employee statements about the employer that meet the definition of defamation as being maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard of their truthy or falsity.”
- GC Abruzzo reads McLaren to be consistent with Memorandum OM 07-27, which endorses the use of confidentiality clauses “that prohibit an employee from disclosing the financial terms of [a] settlement to anyone other than the person’s family, attorney and financial advisor.”
- Whether or not an employee signs an overly broad severance agreement is irrelevant, as the mere proffer of a severance agreement containing unlawful provisions violates the NLRA.
- A well drafted savings clause, while it “may be useful to resolve ambiguity over vague terms . . . would not necessarily cure overly broad provisions.”
- Overly broad provisions in a severance agreement will not automatically render the entire agreement (including the release) null and void, as the preferred remedy is to strike the offending language.
- GC Abruzzo takes the position that the McLaren decision applies retroactively – meaning an employer’s maintenance or enforcement of unlawful provisions proffered before the Board issued its February 21, 2023 decision would open up the employer to an unfair labor practice charge. While GC Abruzzo acknowledges that the six-month statute of limitations for asserting an unfair labor practice charge under the NLRA may protect employers that proffered overly broad agreements more than six months ago, she posits that claims related to the maintenance and/or enforcement of a previously-entered severance agreement with unlawful provisions would not be time barred. GC Abruzzo advises employers to “consider remedying [prior] violations . . . by contacting employees subject to severance agreements with overly broad provisions and advising them that the provisions are null and void and that they will not seek to enforce the agreements or pursue any penalties, monetary or otherwise, for breaches of those unlawful provisions.” While providing notice to employees is not mandatory, GC Abruzzo noted that doing so “could form the basis for consideration of a merit dismissal if a meritorious charge solely alleging an unlawful proffer is filed.”
- Severance agreements with supervisors could potentially violate McLaren if the supervisor is retaliated against for their refusal to commit an unfair labor practice and as a consequence the employer offers the supervisor a severance agreement.
Finally, GC Abruzzo indicates that other employment-related agreements and severance provisions may violate the NLRA based on the Board’s reasoning in McLaren Macomb. GC Abruzzo suggests that field offices should look at offer letters, confidentiality agreements and other agreements entered into during the course of employment, including non-compete clauses, no solicitation clauses, and broad liability releases and covenants not to sue.
While GC Abruzzo’s Memorandum does not carry the weight of law, it does help shed light on the sort of enforcement efforts that employers can expect to see from the NLRB field offices in the wake of the McLaren Macomb decision. There will likely be challenges to the McLaren Macomb decision and GC Abruzzo’s interpretation of the same; and if a new administration comes into power in 2024, the pendulum could swing the other direction. Meanwhile, employers should undertake a thorough review of their employment-related agreements to ensure their employment practices stay abreast of the numerous changes in a quickly evolving legal environment for employers and employees.