In February, the National Labor Relations Board (NLRB) issued its decision in McLaren Macomb, 372 NLRB No. 52, holding that the offer of a severance agreement with overly broad non-disparagement and confidentiality clauses that tend to interfere with, restrain, or coerce employees’ exercise of their Section 7 rights is unlawful.
Last Wednesday, General Counsel Jennifer Abruzzo issued Memorandum GC 23-05, providing “Guidance in Response to Inquiries about the McLaren Macomb Decision.” The memo reiterates that “the mere proffer of the agreement itself violates Section 8(a)(1) of the Act because it has a reasonable tendency to interfere with or restrain the prospective exercise of those rights – both by the separating employee and those who remain employed.” The memo explains that the conditioning of the severance benefits on the waiver of the employee’s statutory rights inherently coerces them, regardless of whether the employee accepts the severance agreement.
What is Section 8(a)(1)?
Under Section 8(a)(1) of the National Labor Relations Act (NLRA), employers commit an unfair labor practice if they interfere with, restrain, or coerce employees in the exercise of Section 7 rights to engage in concerted activities for the purpose of collective bargaining or other mutual aid or protection, or to refrain from such (with limited exceptions).
What were the clauses at issue?
Below are the clauses contained in the severance agreement at issue in McLaren Macomb.
Confidentiality Agreement. The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.
Non-Disclosure. At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.
In addition, the severance agreement contained a clause that provided for injunctive relief and for the employee to pay damages, costs, and attorney’s fees if the employee were to violate the above clauses.
Does this ruling ban all confidentiality and non-disparagement clauses?
No. Restrictions that are narrowly-tailored and based on legitimate business justifications may be acceptable. For example, preventing employees from revealing proprietary information to a competitor or restricting employees from illegal defamation may not be found to violate the NLRA.
Will a disclaimer or “savings clause” save me?
Not from everything. A savings clause or disclaimer may help to resolve ambiguity, but it will not excuse the inclusion of overly broad terms. An employer can still potentially be held liable for inconsistent messages that could impede employees’ exercise of Section 7 rights.
What if we already issued severance agreements that may contain overly broad terms?
The McLaren Macomb decision applies retroactively. The agreement itself may be subject to the six-month statute of limitation in Section 10(b), but enforcement of a previously issued restriction would be a current violation. The memo advises that employers should contact employees who were subject to overly broad terms, and advise them that the provisions are null and void and that the employer will not seek to enforce the agreement or pursue any penalties.
What else do I need to know about the memo?
Employers should keep in mind that just because the employee is separating from employment, the NLRA does not limit the definition of “employee” to employees of a particular employer. Additionally, the NLRB’s decision in McLaren Macomb also serves to protect the rights of the employees who remain employed by ensuring the former employees are able to assist in concerted activities and to participate in NLRB proceedings.
Additionally, while supervisors are not generally protected by the NLRA, they are protected from retaliation by the employer for refusing to act on the employer’s behalf in committing an unfair labor practice. A supervisor may refuse to issue a severance agreement with overly broad restrictions. A severance agreement issued to a supervisor restricting their participation in an NLRB proceeding may also be found unlawful.
Employers should consider seeking the assistance of legal counsel in drafting legally sound, enforceable agreements.