Assoc. Chair of the EMPLOYMENT LAW practice
On February 21, 2023, the National Labor Relations Board (“NLRB”) ruled in McLaren Macomb, 372 NLRB No. 58 (2023) that employers may not offer severance agreements that require non-supervisor employees to “broadly waive their rights” under the National Labor Relations Act (“NLRA”).
Specifically, the NLRB found that broad non-disparagement and confidentiality provisions in severance agreements are illegal because they interfere with employee’s rights under the NLRA. Under the decision, the mere “proffering” of a severance agreement, which contains the problematic provisions violates the NLRA and constitutes an independent unlawful labor practice. This is because the act of conditioning the receipt of benefits on the acceptance of what the NLRB considered to be unlawful terms was deemed coercive in and of itself.
Subsequently, on March 22, 2023, NLRB General Counsel Jennifer Abruzzo issued a Memorandum (GC 23-05), in which she provided guidance on the decision’s scope.
She clarified that with respect to confidentiality provisions, they are illegal, unless (1) they solely prohibit an employee from generally disclosing the financial terms of the settlement; or (2) are “narrowly-tailored to restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications.”
With respect to non-disparagement agreements, they still may be used, but only if they are “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 for their truth or falsity.”
Importantly, however, this ruling does not apply to supervisors or independent contractors.
Therefore, employers may continue to include non-disparagement and confidentiality clauses in their severance agreements with such individuals.
The NLRA defines “supervisor” to mean “any individual having authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or to direct them, or to adjust their grievances, or effectively to recommend such action, if in connection with the foregoing exercise of such authority is not of a merely routine or clerical nature, but requires the use of independent judgment.”