NLRB Nixes Confidentiality, Nondisparagement Clauses in Separation Agreements

Author: Robert S. Teachout, Brightmine Legal Editor

February 28, 2023

Employers will no longer be able to require employees, as a prerequisite to receiving severance pay, to agree to remain silent about company working conditions or to refrain from giving negative feedback about the employer. The National Labor Relations Board (NLRB) put the brakes on the use of such conditions in separation agreements if they require employees to waive their rights under the National Labor Relations Act (NLRA).

In McLaren Macomb, the Board held that inclusion of nondisparagement and confidentiality clauses as part of a separation agreement unlawfully restrains or coerces employees' exercise of their NLRA right to engage in concerted activities for the purpose of mutual aid or protection. The ability of employees to discuss the terms and conditions of their employment, including any negative opinion of the employer, is considered a fundamental protected concerted activity.

The Board observed that an employer's offer of an agreement with such terms is itself an attempt to deter employees from exercising their statutory rights, particularly at a time when employees may feel pressure give up their rights in order to get the benefits provided in the agreement. "It's long been understood by the Board and the courts that employers cannot ask individual employees to choose between receiving benefits and exercising their rights under the National Labor Relations Act," said NLRB Chairman Lauren McFerran.

Impact of the Decision

While the decision has received a lot of attention, not everyone agrees that the ruling has as broad an impact as it seems on first look. Attorney Jon Hyman of Wickens Herzer Panza, pointed out that this case applies only to employees that the NLRA covers. "It does not apply to anyone classified as a 'supervisor' under the NLRA," he said. "For these employees, keep your severance agreements as-is; this case does not impact them at all."

Hyman also pointed out that McLaren Macomb applies prospectively and will have no impact on previously signed separation agreements. But he also explained that, while the decision won't invalidate any agreements already signed, the NLRA does have a six-month statute of limitations. "Any agreement with the language signed in the past six months is potentially subject to an attack via an unfair labor practice charge filed with the Board," Hyman says.

Employer Options

"The decision leaves a lot of questions unanswered, putting employers in a challenging position until more decisions come out or the case gets tweaked on a (likely) appeal," said Daniel Schwartz, a partner with Shipman and Goodwin, LLP in Connecticut. He noted that employers have several options to consider about how to adapt their separation agreements in light to the decision, including:

  • Simply deleting these provisions from the separation agreement for applicable employees, which Schwartz said is the safest option;
  • Adding a disclaimer that the agreement does not prohibit the employee from engaging in activity protected by the NLRA, though the NLRB has previously questioned disclaimer use in employee handbooks;
  • Narrowly tailoring the provisions on confidentiality and nondisparagement; or
  • Using saving clauses to sever the offending clause from the agreement.

But Schwartz cautioned employers that the NLRB has suggested that just offering this type of agreement might violate the NLRA. "These and other options should be discussed robustly with your counsel as the risk factors and decision trees may differ by industry, company size and situation."