NLRB General Counsel Issues Memorandum on Severance Agreement Restrictions

By Employers Council Staff posted 03-24-2023 02:32 PM

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On February 21, 2023, the National Labor Relations Board (NLRB) issued a decision in McLaren Macomb, overturning Trump-era precedent, holding that employers may not offer non-supervisory employees severance agreements that require them to broadly waive their rights under Section 7 of the National Labor Relations Act (NLRA). On March 22, 2023, NLRB General Counsel Jennifer Abruzzo published Memorandum GC 23-05, ostensibly aimed at assisting NLRB regional directors in responding to inquiries from workers, employers, labor organizations, and the public about implications stemming from the decision.

Section 7 of the NLRA gives employees the right to self-organization, to bargain collectively, and to engage in concerted activities. It applies to all employees in unionized and non-unionized settings. As a result of the McLaren Macomb decision, severance agreements that have facially overbroad non-disparagement, non-disclosure, or confidentiality clauses may impinge on employee Section 7 NLRA rights.

In addition to reviewing key points of the McLaren Macomb case, the memorandum offers some key takeaways for employers, including the following:

Severance agreements are not banned by the McLaren Macomb decision.
The circumstances surrounding the offer of the severance agreement to an employee do not necessarily matter if the provisions in the agreement are facially overbroad. In other words, a severance agreement with overly broad provisions is unlawful regardless of the circumstances.
Whether or not an employee signs the severance agreement is irrelevant if its provisions are facially overbroad.
The McLaren Macomb decision will have a retroactive effect – meaning maintaining and enforcing a previously entered severance agreement that includes unlawful provisions restricting an employee’s Section 7 rights is a violation of the NLRA.
Former employees are entitled to the same protections under the NLRA as current employees.

Employees and unions cannot waive their rights under the NLRA and agree to overly broad confidentiality and/or non-disparagement clauses.
Severance agreements can still include confidentiality, non-disclosure, and non-disparagement clauses, as long as they are narrowly tailored.

- Confidentiality agreements are valid if they are restricted to the dissemination of proprietary or trade secret information for a specified period, based on a legitimate business justification.
- Non-disparagement clauses can be narrowly tailored to limit an employee’s statements about the employer that would rise to the level of defamation – maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity.

The Board will look at severing overbroad provisions instead of voiding entire agreements.

Ultimately, the NLRB decides whether the provisions in challenged severance agreement are lawful for purposes of the NLRA. The general counsel’s memorandum is not law, and the McLaren Macomb decision is still subject to appeal. However, it is a callout to employers to review the provisions in their severance agreements and assess the scope of their reach. Employers Council can assist with reviewing and drafting severance agreements and provide guidance on how to manage already executed agreements. If you need assistance or have any questions, please email us.