March 24, 2023
Last month, the National Labor Relations Board (“Board”) issued a decision in McClaren McComb, 372 NLRB No. 58 (2023), that overturned two Trump Board rulings permitting employers to include confidentiality and non-disparagement provisions in severance agreements (read Farhang & Medcoff’s full legal alert on the decision here). Under the Board’s new rule, the “mere proffer” of a severance agreement, which includes an overly broad confidentiality or non-disparagement provision, violates the National Labor Relations Act (the “Act”). Previously, the Board held that severance agreements only violated the Act when accompanied by a showing of an anti-union animus and additional coercive or otherwise unlawful conduct.
Yesterday, the Board’s General Counsel Jennifer Abruzzo issued a Memorandum to provide guidance on how to apply the McClaren McComb decision. The General Counsel issued “this Memo to assist Regions in responding to inquiries from workers, employers, labor organizations, and the public about implications stemming from” the McClaren McComb decision.
The Memorandum clarifies that general employment releases, which waive only the right to pursue employment claims, remain lawful. The General Counsel also noted that signing the severance agreement is irrelevant for the purpose of finding a violation of the Act “since the proffer itself inherently coerces employees” to waive statutorily protected rights to receive severance benefits (i.e., money or COBRA coverage).
The Memo also addresses the following significant questions:
Retroactivity
The General Counsel advised that an unlawful, proffered severance agreement is subject to the Act’s six-month statute of limitations. However, she also noted that an employer may violate the Act by “maintaining and/or enforcing a previously entered severance agreements with unlawful provisions.”
The Impact of an Overly Broad Provision on the Release of Claims
The General Counsel explained that Regions would seek to void unlawful provisions only “… as opposed to the entire agreement.” Simultaneously, the General Counsel encouraged employers to consider prospectively fixing such violations by contacting any impacted employees and advising them that the overly broad provisions were null and void.
Protection of Former Employees
The General Counsel noted that Section 7 rights are not limited to discussions with coworkers, “as they do not depend on the existence of an employment relationship between employee and employer.”
The Future of Confidentiality Provisions in Severance Agreements
The General Counsel explained that a narrowly-tailored confidentiality provision, limited to a prohibition on the disclosure of proprietary or trade secret information, may be lawful. The General Counsel also found Operations Memo 07-27 (provides guidance on the enforcement of non-Board settlements) to be consistent with McClaren McComb. Notably, OM 07-27 allowed confidentiality clauses that prohibited an employee’s disclosure of the financial terms of a settlement.
The Future of Non-Disparagement Provisions in Severance Agreements
The General Counsel advised that broad non-disparagement language violates the Act. The General Counsel then concluded that a narrowly-tailored, justified non-disparagement provision that prohibits defamatory statements (i.e., “as being maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity”) may be lawful.
Other Potentially Unlawful Provisions
While the focus remains on confidentiality and non-disparagement provisions, the General Counsel further explained that the Board will also review other provisions for their potential impact on rights under the Act. The General Counsel specifically identified are the following potentially problematic clauses:
- Non-compete restrictions;
- Non-solicitation restrictions;
- No poaching provisions;
- Broad liability releases; and
- Cooperation requirements.
Finally, the General Counsel noted that a “savings clause” or disclaimer language will not cure an otherwise overly broad provision. Employers should therefore take steps now to ensure that their severance agreements for non-supervisory employees comply with McClaren McComb and the General Counsel’s recent guidance. The attorneys at Farhang & Medcoff understand these difficult challenges, and we remain ready to assist. Call us at (520)214-2000 and schedule a consultation today.
This writing is for informational purposes only and does not constitute legal advice. No attorney-client relationship is formed by the dissemination of this writing.
