February 28, 2023

NLRB Rules that Standard Confidentiality and Non-Disparagement Provisions Contained in Employee Separation Agreements are Unlawful

On Tuesday, February 21, 2023, the National Labor Relations Board (NLRB) issued a decision holding that certain provisions that are commonly found in employee separation (severance) agreements – specifically, non-disparagement provisions and provisions requiring an individual to keep the terms of a separation agreement confidential – are unlawful under Section 7 of the National Labor Relations Act (NLRA).  McLaren Macomb, 372 NLRB No. 58 (Feb. 21, 2023).  This is a significant decision that could drastically affect how separation agreements are written.  While the NLRB’s decision may be appealed to federal court, that will take time.

Section 7 of the NLRA protects the rights of employees to engage in concerted activities for the purpose of mutual aid and protection, to organize a union, and to engage in other protected activities. Although many people assume the NLRA only applies to union employees, that is wrong; it applies to both unionized and non-unionized workforces.

But, the NLRA does not apply to all employees.  One significant exception is that the NLRA does not apply to supervisors.  29 U.S.C. §152(3).  A supervisor is defined as “any individual having authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibly to direct them, or to adjust their grievances, or effectively to recommend such action, if in connection with the foregoing the exercise of such authority is not of a merely routine or clerical nature, but requires the use of independent judgment.”  29 U.S.C. §152(11).

Moving forward, employers will have to make decisions regarding confidentiality and non-disparagement clauses in separation agreements they provide to non-supervisors.  Some employers may choose to include them or may include them but make them narrower.  More risk averse employers may choose not to include such provisions at all.  Yet other employers may choose to include such provisions but add language making it clear they are not intended to infringe on an individual’s right to discuss terms and conditions of employment or other rights under Section 7 of the NLRA.  In McLaren Macomb, the NLRB seemed to leave open this last possibility but did not explain how to draft a separation agreement to be compliant.

Employer Takeaway: The bottom line is that separation agreements should not be cookie cutter agreements.  As an employer, review your agreements and the reasons behind each provision, and make sure to comply with applicable law.