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Apr 06, 2023

NLRB general counsel weighs in on severance agreements

Labor RelationsWage and Hour 

On March 22, 2023, the general counsel for the National Labor Relations Board issued an internal staff memo explaining how to apply the Board’s recent decision that the confidentiality and nondisparagement provisions in an employer’s severance agreements violated the National Labor Relations Act (NLRA). The general counsel is the agency’s top enforcement lawyer, who approves what complaints to bring to the Board to resolve. As we previously reported, the Board’s February 2023 decision in McLaren Macomb determined that the confidentiality (nondisclosure) and nondisparagement provisions in an employer’s severance agreements were so broad that they interfered with employees’ rights to band together to address wages, hours, and working conditions under the NLRA. Some of the key points are:

  • Separation agreements, in which an employer provides severance pay in exchange for a release of claims, are still okay, but with significant limitations. The memo says an agreement is acceptable if it only addresses the signing employee’s employment claims arising through the date of the agreement (i.e., it doesn’t limit future conduct). The agreement cannot affect “the rights of employees to engage with one another to improve their lot as employees.” The memo says this includes “channels outside the immediate employee-employer relationship, such as through accessing the Board, their union, judicial or administrative or legislative forums, the media or other third parties.”
  • An agreement that prevents a supervisor from participating in a Board proceeding could be unlawful. Supervisors ordinarily aren’t protected by the NLRA, but employers cannot retaliate against supervisors for refusing to violate the law. A supervisor’s testimony might be necessary for the Board to determine whether unlawful activity occurred.
  • The Board’s decision is retroactive. The memo notes that the agency has previously settled cases in which employers with overly broad provisions in separation agreements that “chilled” the exercise of rights under the NLRA were required to notify their former employees that they wouldn’t enforce those provisions. The memo recommends that employers consider doing so on their own initiative. Although the NLRA has only a six-month statute of limitations, the memo says that continuing to enforce unlawful provisions would constitute a new violation. [Caution from Vigilant: Contact your Vigilant Law Group employment attorney before taking any actions on this front. Reaching out to former employees may not be advisable depending on the situation.]
  • Former employees are entitled to the same protections under the NLRA as current employees.
  • Future NLRA rights cannot be waived.
  • Unions cannot waive NLRA rights on behalf of employees.
  • Confidentiality clauses must be narrowly tailored. This means that they may “restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications.” An agreement not to disclose the financial terms of a settlement is also acceptable. [Caution from Vigilant: Some states prohibit employers from requiring the financial terms of an employment settlement to be kept confidential.]
  • Nondisparagement clauses must also be narrowly tailored. The memo limits this to defamatory statements that are “maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity.”
  • Savings clauses may be useful to clarify what conduct is permissible under the NLRA. The memo provides a lengthy description of all of the protected activities that the general counsel would like to see in such a savings clause.
  • Additional language may also be problematic, such as non-compete, no solicitation, and no poaching clauses. The memo provides additional examples of language that the general counsel finds troublesome, including a requirement to cooperate in current or future investigations under the NLRA.

Tips: The memo doesn’t have the force of law, but it provides insight into how the agency will respond to complaints. It’s highly likely that your existing separation agreements and settlement agreements contain language that the current Board and general counsel would consider to be overbroad. There may be reasons in certain cases to follow up with individuals to clarify that you won’t be enforcing certain provisions. It may make more sense in most cases, however, to wait and see whether an issue arises. Talk with your Vigilant Law Group employment attorney if you have any concerns about past agreements, or if you need us to draft a new agreement.

This website presents general information in nontechnical language. This information is not legal advice. Before applying this information to a specific management decision, consult legal counsel.