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March 9, 2023 | Legal Advisory

On February 21, 2023, in the case of McLaren Macomb, the National Labor Relations Board ruled that an employer violated the National Labor Relations Act by including non-disparagement and confidentiality provisions in severance agreements offered to furloughed employees. Prohibiting a former employee from disparaging the employer’s reputation or from disclosing the terms of the severance agreement, the Board ruled, interfered with the employee’s protected right to engage in concerted activity under the NLRA. As a result, employers must now consider more carefully whether and when to include what had been generally accepted and widely used non-disparagement and confidentiality clauses in their severance agreements. 

History of the Board’s Decisions on Severance Agreements

The McLaren Macomb decision marks the fourth time in five years that the Board has addressed this issue. In 2018, the Board ruled in Shamrock Foods that the mere proffer of a separation agreement containing confidentiality and non-disparagement provisions violated the NLRA. The Shamrock Foods decision, citing prior Board precedent, focused on the language of the agreement itself in determining that the agreement interfered with employees’ NLRA rights. 

In 2020, however, the Board decided a pair of cases – Baylor University Medical Center and IGT d/b/a International Game Technology – that shifted the analysis from focusing on the language of the agreement to the circumstances under which the agreement was presented to employees. In the Baylor decision, issued in March 2020, the employer had offered severance agreements containing a “No Participation in Claims” provision as well as a “Confidentiality” clause. The Board ruled that the mere proffer of the agreement did not violate the NLRA because the employee was not obligated to sign the agreement and because it only applied to post-employment conduct.

Several months later, in November 2020, the Board ruled in IGT that the offer of a separation agreement containing a non-disparagement provision did not violate the NLRA for the same reasons referenced in Baylor. In further support of its ruling, the Board noted that there was no evidence of unlawful discrimination or other unlawful conduct by the employer.

The McLaren Macomb Decision

In McLaren Macomb, the Board overruled the Baylor and IGT decisions, and returned to the analysis applied in Shamrock Foods, focusing on the language of the agreement at issue. Reasoning that a severance agreement is unlawful if its terms would reasonably tend to interfere with the employees’ exercise of their NLRA rights, the Board ruled that an employer’s mere proffer of such an agreement to employees is unlawful. 

The severance agreement in McLaren Macomb contained a broad non-disparagement clause, prohibiting departing employees from making public statements that could harm the image of the employer. The Board rule that such a provision was an unlawful restriction of NLRA rights because “[p]ublic statements by employees about the workplace are central to the exercise of employee rights under the Act.” The severance agreement also included a confidentiality provision prohibiting departing employees from disclosing the terms of the agreement to “any third person”; the Board similarly found this restriction to violate the NLRA.  

Moving Forward

It is certainly possible that McLaren Macomb could be reversed by the courts, or that the Board could overrule itself again in some future case. Until such time, however, employers should not routinely insert broad confidentiality and non-disclosure provisions into their severance agreements. This does not mean that such clauses can never be included – carefully drafted language might be appropriate in some cases depending upon the employee and the circumstances involved.

While the NLRA protects the rights of employees to engage in concerted activity, that protection does not generally extend to supervisors or managers, as they are excluded from the NLRA’s definition of “employee.” Consequently, in most cases, a severance agreement proffered to a supervisor or manager would not be subject to the McLaren Macomb decision.

For agreements proffered to employees who are not supervisors or managers, there is clearly some risk to including even a narrowly drafted confidentiality or non-disparagement clause. Some commentators have suggested including disclaimers that exclude an employee’s exercise of NLRA rights. We note, however, that the Board has shown little deference to such disclaimers in other contexts.

Employers may want to take a close look at the real value of confidentiality and non-disparagement provisions in a given context. Other federal and state laws already limit the efficacy of such restrictions, and there is often a question of whether and how they can be enforced, regardless of the McLaren Macomb implications.

Before including a confidentiality or non-disparagement provision in a separation agreement, an employer must first consider whether such clauses are appropriate and necessary for that particular employee. If they are to be included, the clauses should be narrowly drafted, with appropriate carveouts, to facilitate enforceability and avoid violating the NLRA and other laws.

This advisory was prepared by Nutter’s Labor, Employment and Benefits practice group. For more information, please contact any member of the LEB group or your Nutter attorney at 617.439.2000.

This advisory is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.