NLRB Attacks Non-Disparagement And Confidentiality Clauses In Employee Releases, Severance Agreements

• Jurisdiction: United States,Federal
• Law Firm: McDermott Will & Emery
• Subject Matter: Employment and HR, Employee Rights/ Labour Relations
• Author: Mr Christopher Foster, Marjorie C. Soto Garcia, Nicholas Meyer and P. Kevin Connelly
• Published date: 02 March 2023

Employers, especially in the context of workforce reductions, may provide departing employees with severance agreements in exchange for a release. Those agreements often include non-disparagement clauses and confidentiality clauses regarding the terms and the amount of the agreement.

On February 21, 2023, in McLaren Macomb, the National Labor Relations Board (NLRB) held that such clauses infringe on employees' rights under the National Labor Relations Act (NLRA). Importantly, McLaren applies to both unionized and non-unionized workplaces alike.

IN DEPTH

McLaren limits use of confidentiality and non-disparagement provisions within employee-employer agreements. Under McLaren, employers can violate Section 8(a)(1) of the NLRA by merely offering unlawful terms, regardless of whether the employee ever signs such an agreement and regardless of whether the employer actually seeks to enforce such clauses.

FACTS OF McLAREN MACOMB

McLaren Macomb operates a teaching hospital in Michigan. There was a reduction in force with the hospital eliminating its outpatient services, resulting in the furlough of 11 union-represented employees. McLaren provided a severance agreement that included a release, as well as standard clauses prohibiting either disparaging McLaren (a non-disparagement clause) or disclosing the terms of the agreement itself (a confidentiality clause).

Looking at each, the clauses were facially neutral on any NLRA rights:

Confidentiality: '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.'

THE LEGAL BASIS OF McLAREN MACOMB

This NLRB decision takes an expansive view of employee rights under Section 7 of the...