NLRB Says Severance Agreements That Contain Broad Confidentiality And Non-Disparagement Clauses Violate The National Labor Relations Act

On February 21, 2023, the National Labor Relations Board ruled that confidentiality and non-disparagement clauses typically found in severance agreements are unlawful if they interfere with an employee’s Section 7 rights under the National Labor Relations Act. Section 7 rights include the right to organize, bargain collectively, and engaged in concerted activities that affect terms and conditions of employment. In McLaren Macomb, the Board held that an employer commits an unfair labor practice by including overly restrictive language into a severance agreement, regardless of whether the employer actually seeks to enforce its rights under the contract.

The confidentiality clause at issue reads:

6.  Confidentiality Agreement.  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.

The non-disparagement clause at issue stated:

7.  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 McLaren Macomb decision found that both contractual provisions “interfere with, restrain, or coerce employees’ exercise of Section 7 rights.” The decision is so broad that language restricting an employee’s ability to speak negatively or critically about the employer or former employer or that otherwise restricts the employee from discussing the amount of the settlement agreement is unlawful and constitutes an unfair labor practice.

This decision affects both union and non-union workplaces. The ruling is likely to make its way through the court system. In the meantime, clients are strongly encouraged to contact their counsel before offering a severance agreement to an employee that contains a confidentiality and non-disparagement clause.

Clients can read the McLaren Macomb decision here:

https://www.bdblaw.com/wp-content/uploads/2023/02/Board-Decision.pdf