California Labor &
Employment Law Blog
Ensuring Your Severance Agreements Are Lawful
Mar 29, 2024

Ensuring Your Severance Agreements Are Lawful

Topics: Union-Management Relations

Approximately one year ago, we reported on the National Labor Relations Board’s decision in McLaren Macomb and NLRB General Counsel Jennifer Abruzzo’s subsequent interpretation of that decision and what it means for employers in NLRB GC Memorandum 23-05.

The McLaren Macomb decision put new restrictions limiting how employers can use non-disparagement clauses and confidentiality clauses in severance agreements, holding that typical non-disparagement clauses and confidentiality clauses interfere with employees’ section 7 rights to engage in concerted activity. General Counsel Abruzzo’s memo expanded McLaren Macomb even further, holding that (1) in certain instances the decision has applicability to supervisors, (2) the decision applies retroactively, and (3) the mere act of offering a severance/settlement agreement with an overbroad confidentiality or non-disparagement clause is a violation of the National Labor Relations Act (even if the clause is not included in the final agreement).

Last week, the Board announced that its Region-32 Oakland Regional Director, Valerie Hardy-Mahoney, approved a settlement agreement that removes an overbroad confidentiality provision from an employer’s severance agreements on the basis that the provision infringed on employees’ protected activity under the National Labor Relations Act in violation of McLaren Macomb. In August 2023, former employees of Lucid Group, Inc. (Lucid), an electric car manufacturer, who were laid off due to a May 2023 company reduction in force, filed an unfair labor practice charge against Lucid, alleging that the severance agreement offered to all of them was unlawful as its confidentiality provisions discouraged and prevented them from exercising their rights to engage in protected and concerted activity as preserved under the National Labor Relations Act.

As part of the settlement agreement with Region 32, Lucid was required to revise all the severance agreements from the layoff and all other agreements by (1) removing the overbroad confidentiality provision, (2) not seeking enforcement of that provision entered into by the charging parties, and (3) posting a notice regarding employee rights at its Newark, California facility, as well as to email all current employees and the Newark employees who had been laid off in May 2023.

The Lucid prosecution and settlement makes it clear that the NLRB is serious about enforcing McLaren Macomb and its publicity may give rise to future ULP charges against employers who continue to include confidentiality and/or non-disparagement clauses that are not consistent with the Board’s interpretation of McLaren Macomb. There has yet to be a published court decision interpreting McLaren Macomb. Until we get guidance from the courts, this development reiterates the importance of ensuring that employers are aware of what the Board considers to be lawful when it comes to severance agreement confidentiality and non-disparagement clauses before determining what to offer their employees on these issues.

Employers should review their standard settlement and severance agreements, be familiar with McLaren Macomb and NLRB GC Memorandum 23-05, and decide whether revisions to their standard agreements is appropriate. Employers should also consider whether it makes sense to notify former employees who signed agreements with provisions in violation of McLaren Macomb that these provisions will not be enforced.

CDF Labor Law’s Traditional Labor Practice Group is available to help employers evaluate their agreements and guide decisions on any necessary or helpful modifications and the related risks.

About CDF

For over 25 years, CDF has distinguished itself as one of the top employment, labor and immigration firms in California, representing employers in single-plaintiff and class action lawsuits and advising employers on related legal compliance and risk avoidance. We cover the state, with five locations from Sacramento to San Diego.

> visit primary site

About the Editor in Chief

Sacramento Office Managing Partner and Chair of CDF’s Traditional Labor Law Practice Group. Mark has been practicing labor and employment law in California for thirty years. His practice has a special emphasis on the representation of California employers in union-management relations and handling federal and state court litigation and administrative matters triggered by all types of employment-related disputes. He is also adept at providing creative and practical legal advice to help minimize the risks inherent in employing workers in California. He recently named “Sacramento Lawyer of the Year” in Employment Law-Management for 2021 by Best Lawyers®.
> Full Bio   > Email   Call 916.361.0991

CDF Labor Law LLP © 2024

Editorial Board About CDF What We Do Contact Us Attorney Advertising Disclaimer Privacy Policy Cookie Policy