On February 21, 2023, the National Labor Relations Board (the “Board”) issued a decision that returns to previous precedent, holding that employers may not offer employees severance agreements that require employees to broadly waive their rights under the National Labor Relations Act (“NLRA”).
Under the Board’s new rule issued in McLaren Macomb, 372 NLRB No. 58 (2023), which applies to union and non-union employees alike, the “mere proffer” of a severance agreement that conditions receipt of benefits on the “forfeiture of statutory rights”—like the acceptance of overbroad confidentiality and non-disparagement provisions—“plainly has a reasonable tendency to interfere with, restrain, or coerce the exercise of those rights [afforded under Section 7 of the NLRA]” in violation of Section 8(a)(1) of the NLRA. Prior to this, two of the Board’s 2020 decisions in Baylor University Medical Center and IGT d/b/a International Game Technology held that it was not unlawful, by itself, for an employer to offer similar severance agreements with such clauses in return for severance payments.
The decision joins a wider landscape of protective measures in recent years that are aimed at discouraging or prohibiting confidentiality and/or non-disparagement provisions in settlements or other agreements. For instance, the Speak Out Act passed by Congress last year and signed into law by President Biden on December 7, 2022, makes void any nondisclosure or non-disparagement clause that attempts to preemptively prohibit employees from talking about potential future instances of sexual harassment or assault in the workplace. Previously, other similar federal laws prohibited forced arbitration in sexual assault and sexual harassment disputes, as well as eliminated an employer’s ability to make tax deductions for settlements, payouts, and attorney’s fees in cases related to sexual harassment or abuse if such payments were subject to a nondisclosure agreement.
While McLaren involved language the current Board deemed overbroad, the question is still open as to whether employers can maintain lawful confidentiality and non-disparagement provisions if they are narrowly tailored to mitigate the concerns contained in the decision. Employers should review any non-disparagement and confidentiality provisions they are proffering to employees or potential employees, regardless of the type of document in which the clauses are incorporated. Moreover, a well-drafted “severability” provision may help save the rest of an agreement if certain provisions are found to be unlawful or unenforceable.
Murtha Cullina will closely follow and report on any federal court appeal of the McLaren decision, as well as any related decisions and/or legislation concerning confidentiality and non-disparagement clauses.
