NLRB General Counsel Releases Memorandum Providing Guidance on Non-Disparagement and Confidentiality Clauses in Settlement Agreements
Topics: Union-Management Relations
Last week, on March 22, 2023, the General Counsel of the National Labor Relations Board (NLRB), Jennifer Abruzzo, released Memorandum GC 23-05, which provides clarification of the recent McLaren Macomb decision.
In McLaren Macomb, 372 NLRB No. 58, which was issued last month, the Board returned to longstanding precedent holding that employers violate the National Labor Relations Act (NLRA) when they offer employees severance agreements with broad non-disparagement or confidentiality provisions because such provisions require employees to waive their rights to engage in concerted activity which are protected under Section 7 of the NLRA. The decision explained that simply offering employees a severance agreement that requires them to broadly give up their rights under Section 7 of the Act violates Section 8(a)(1) of the Act because the employer’s offer is itself an attempt to deter employees from exercising their statutory rights to engage in concerted activity.
Many questions were left unanswered in the Board’s decision. The General Counsel’s memo provides guidance on the Board’s position and interpretations of the decision. As one might imagine, it is not pretty for employers.
The GC Memorandum provides the following guidance to assist Regions in responding to inquiries from workers, employers, labor organizations, and the public:
- Narrowly tailored severance agreements are permissible. Employers can continue to offer, maintain and enforce settlement agreements so long as the agreement does not include overbroad provisions that affect the rights of employees to engage with one another to improve their lot as employees (including outside the immediate employee-employer relationship, such as access to the Board, the union, judicial, administrative or legislative forums, the media or other third parties).
- The circumstances surrounding the proffer of the severance agreement do not matter. As noted in the decision, an employer can have no legitimate interest in maintaining a facially unlawful provision in a severance agreement, much less an interest that somehow outweighs the Section 7 rights of employees.
- Whether or not the employee signed the severance agreement does not matter for purposes of finding that the employer violated the Act. The proffer/offer itself inherently coerces employees by conditioning severance benefits on the waiver of statutory rights.
- An employer who proffers a severance agreement to a supervisor could also be in violation of the Act. Even though supervisors are generally not protected by the Act, the Act does prevent retaliation against supervisors for refusing to violate the Act per their employer’s directives. An employer who proffers a severance agreement in connection with this conduct (i.e., preventing the supervisor from participating in a Board proceeding) could be in violation of the Act.
- The decision has retroactive application. Not only does the decision have retroactive application, but the General Counsel argues that maintaining and/or enforcing previously entered severance agreements with unlawful provisions is a continuing violation and not time-barred.
- It is likely that only the overbroad and unlawful provisions will be voided out as opposed to the entire severance agreement. The General Counsel also advises that employers should contact employees subject to severance agreements with overly broad provisions to advise them that the provisions are null and void and that they will not seek to enforce the agreements as to the overbroad provisions. If a ULP charge is filed alleging an unlawful proffer, the employer’s conduct attempting to reach employees and void the provisions will be considered in a merit dismissal of the charge.
- The decision applies to both current and former employees. Former employees are entitled to the same protections under the Act.
- The Board acts in a public capacity to protect public rights to effectuate the public policy of the Act. Future rights of employees and the public may not be waived in a way that infringes on Section 7 rights. So even if an employee requests broad confidentiality and/or non-disparagement clause (which is unlikely to happen), broad provisions are likely still deemed to be unlawful.
- Existing law similarly prohibits overly broad provisions in other employer communications. This includes pre-employment and offer letters.
- Confidentiality clauses that are narrowly tailored may be considered lawful. This includes clauses that restrict the dissemination of proprietary or trade secret information based on legitimate business justifications.
- A narrowly tailored, justified, non-disparagement provision that prohibits defamation may be permissible. The provision may be found lawful if it only prohibits the employee from making defamatory statements about the employer (i.e., being maliciously untrue and made with knowledge of their falsity with reckless disregard for their truth or falsity).
- “Savings clauses” or disclaimers will 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 provisions included in severance agreements might interfere with an employee’s Section 7 rights. This includes provisions such as non-compete clauses, no solicitation clauses, no poaching clauses, and broad liability releases.
It remains unclear whether the federal courts will interpret Section 7 of the NLRA as broadly as the NLRB General Counsel is ordering the regions to do. In any case, the McLaren Macomb decision and Memorandum GC-23-05 continue the trend of pro-union decisions from the NLRB and pro-union interpretations from GC Abruzzo. The NLRB is interpreting Section 7 very broadly and taking aggressive action to ensure that employees are free to exercise their Section 7 rights. As a result, employers should review the guidance provided in the General Counsel’s memo and work with counsel to carefully draft severance agreements going forward.