On February 21, 2023, the National Labor Relations Board issued a decision finding that broad confidentiality and non-disparagement provisions of a severance agreement were unlawful because they interfered with employee rights under the National Labor Relations Act. The McLaren McComb case dealt with a severance agreement offered to an employee who was laid off in the wake of the COVID-19 pandemic (full text of the decision available here: Board Decision). The confidentiality provision at issue broadly prohibited the employee from discussing the terms of the agreement with third parties, subject to very limited exceptions. The non-disparagement provision also broadly prohibited statements to other employees or the general public that “could disparage or harm the image” of the employer.
The NLRB determined that the confidentiality provision was unlawful because it tended to discourage the employee from engaging in conduct protected by the NLRA, including filing an unfair labor practice charge, participating in an NLRB investigation, or discussing the severance agreement with coworkers. Similarly, the NLRB determined that the non-disparagement provision infringed on the employee’s right to make public statements about workplace conditions.
Significantly, this decision established that simply offering a severance agreement with such provisions constituted a violation of the NLRA, whether or not the employee ultimately signed the agreement or the employer sought to enforce the agreement. The NLRB reasoned that conditioning severance benefits on acceptance of an agreement with such provisions has a chilling effect on an employee’s right to discuss workplace conditions and may interfere with an employee’s exercise of labor-organizing rights.
So, how should employers approach confidentiality and non-disparagement provisions in severance agreements going forward? As an initial note, Section 7 of the NLRA does not cover certain types of employees, including public sector workers, most supervisors and managers (as defined by the NLRA), and some agricultural workers. However, assuming that the NLRA is applicable, employers should review and update confidentiality, non-disparagement, and non-disclosure provisions in severance agreements, giving due consideration to the following:
- Narrow Restrictions and Clear Definitions. Confidentiality, non-disparagement, and non-disclosure provisions should be narrowly tailored to protect the employer’s interests. Consider what information the employer needs to protect and clearly identify and define those categories – for example, trade secret, privileged, or proprietary information the employee had access to during employment. Consider who the separating employee may or may not discuss the terms of their severance agreement with and define restrictions clearly and narrowly. Consider whether there are valid concerns that a separating employee may make publicized negative statements about the employer and clearly identify and define any prohibitions – for example, reckless or maliciously false statements about the company’s products or services.
- Appropriate Exceptions and Carveouts. In connection with any confidentiality, non-disparagement, or non-disclosure provisions, ensure that appropriate exceptions and carveouts are included to permit the employee to engage in activity protected by the NLRA, including filing unfair labor practice charges, participating in NLRB investigations, engaging in protected, concerted activity, making statements about working conditions, and exercising any other rights protected by the NLRA.
Employers should review and assess their approach to severance agreements in light of this significant decision, and seek legal counsel as needed to ensure legal compliance and enforceability of agreements.
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Weston Hurd attorneys regularly assist employers in all aspects of employment law, including severance and other employment agreements. Please contact Russell Rendall or any of Weston Hurd’s employment attorneys for further information on this and other issues.
