NLRB General Counsel Releases Guidance on Severance Agreements
Recently, we updated our readers on a Feb. 21, 2023, decision by the National Labor Relations Board (NLRB), holding that an employer violated the National Labor Relations Act (NLRA) by proffering severance agreements to several employees that included broad non-disparagement and confidentiality provisions. Demonstrating the roller-coaster ride that NLRB jurisprudence has become, we now return, just one month later, with an important update.
Summary of the McClaren Macomb Decision
As background, in McClaren Macomb, the Board struck down a non-disparagement provision prohibiting former employees from making statements that could disparage or harm the company’s reputation as well as that of its employees, officers, directors, agents, representatives and parent or affiliate companies. The Board argued that this provision could “encompass employee conduct regarding any labor issue, dispute, or term and condition.” Under Section 7 of the NLRA, employees have a statutory right to talk about their pay, working conditions, and other terms and conditions of employment, and to engage in other protected concerted activities regarding such matters. Restricting or chilling the lawful exercise of Section 7 rights is an unfair labor practice under the Act. The Board in McLaren Macomb determined that by conditioning severance benefits on the employee’s assent to the broad non-disparagement clause, the employer had engaged in an unfair labor practice. Similarly, the agreement’s confidentiality provision, which provided that the former employees could not discuss the terms of the agreement with anyone except a spouse or a legal or tax professional, was also deemed unlawful under the NLRA.
NLRB General Counsel Issues Guidance Memo
The McLaren Macomb decision left employers with more questions than answers. Some wondered whether severance agreements remained permissible at all. If so, what were the acceptable parameters? Others asked whether the same principles would be applied to other employer communications and agreements and whether the decision would apply retroactively to agreements entered into before the Board’s decision was issued. Last week, the NLRB’s General Counsel Jennifer Abruzzo issued a Guidance Memorandum (Memo) to its regional offices in which she attempted to tackle some common questions about the application and effect of McLaren Macomb. Unfortunately, Abruzzo’s position on these points is not good news for employers.
In summary, Abruzzo argues:
· McLaren Macomb applies retroactively, invalidating overbroad non-disparagement and confidentiality provisions entered into before the Board’s decision. Moreover, “maintaining and/or enforcing a previously-entered severance agreement with unlawful provisions that restrict the exercise of Section 7 rights continues to be a violation and a charge alleging such” would not be time-barred by the NLRA’s six-month statute of limitations. Abruzzo suggests employers “consider” contacting former employees subject to severance agreements with broad non-disparagement and/or confidentiality provisions to “advis[e] them that the provisions are null and void and that they will not seek to enforce” them. (Parsons’ employment and labor practice team strongly suggests consulting employment counsel before acting on that recommendation.)
· The same principles set forth in McLaren Macomb apply to other employer communications, including offer letters and other agreements.
· Although supervisors are generally not protected under the NLRA, an employer proffering an agreement with overbroad provisions that would prevent a supervisor from participating in a Board proceeding (or similar conduct) could nevertheless be unlawful.
· In terms of finding a violation of the Act, it does not matter whether the employee signs the proffered agreement, and the “surrounding circumstances do not matter when objectively analyzing whether a provision is facially lawful or not.”
· While a “savings clause” or disclaimer “may be useful to resolve ambiguity over vague terms, they would not necessarily cure overly broad provisions. The employer may still be liable for any mixed or inconsistent messages provided to employees that could impede the exercise of Section 7 rights.”
· Other common provisions in severance agreements may also be “problematic.” These include non-compete and no-solicitation provisions, “no poaching clauses,” “broad liability releases and covenants not to sue that may go beyond the employer and/or may go beyond employment claims and matters as of the effective date of the agreement;” and commitments to cooperate in future investigations or proceedings that may implicate the employee’s Section 7 rights.
How Should Employers Move Forward?
In short, very carefully. Abruzzo says that severance agreements may still contain non-disparagement clauses, but they must be narrowly tailored and “limited to employee statements about the employer that meet the definition of defamation as being maliciously untrue, such that they are made with knowledge of their falsity or reckless disregard for their truth or falsity.” Similarly, confidentiality clauses may be lawful where they are narrowly tailored to protect “proprietary or trade secret information for a period of time based on legitimate business justifications.”
In McLaren Macomb, the NLRB frowned upon the lack of any time limit to the non-disparagement and confidentiality obligations, so employers should consider some temporal restrictions. Because “carve-outs” or disclaimers may not be enough to cure overbroad language, provisions that could potentially implicate Section 7 rights must be drafted cautiously, even when disclaimer language will be used.
Finally, Abruzzo suggests that employers might avoid an unfair labor practice by including in their agreements a statement of employee rights under the NLRA. The Memo contains a fairly lengthy list of such rights. It is important to note that federal courts and the NLRB itself) may not ultimately side with all the viewpoints Abruzzo set forth in the Memo. However, the Memo provides helpful insight into how the regional offices of the NLRB will be looking at these issues for the foreseeable future.
More than ever, employers must tread carefully as they prepare employment-related agreements and communications and should work with experienced employment counsel to avoid NLRA-related pitfalls.