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NLRB memo clarifies severance limitations

In February, the National Labor Relations Board (NLRB) issued a decision in McLaren Macomb, establishing that severance agreements with overly broad confidentiality and non-disparagement provisions violated Section 7 of the National Labor Relations Act (the Act).

The decision raised many questions about existing severance agreements, and the NLRB acted quickly to address those concerns. In a March 22 memo, the NLRB’s general counsel provided guidance and additional clarity. Some key takeaways:

  1. Right to improve their lot. Lawful severance agreements can be offered and enforced, provided they do not have “overly broad provisions that affect the rights of employees to engage with one another to improve their lot.” However, per the guidance, this includes the right to extend those efforts to other channels, “such as through accessing the Board, their union, judicial or legislative forums, the media or other third parties.”
  2. While supervisors are generally not protected by the Act, an employer may not retaliate against a supervisor who refuses to present an unlawful agreement to an employee.
  3. McLaren Macomb is retroactive under a six-month statute of limitations. Therefore, the NLRB won’t consider it a violation if a company issued a severance agreement with overly broad provisions more than six months ago. However, guidance indicates that “maintaining and/or enforcing” a severance agreement with unlawful terms would be a violation.
  4. Other employee communication. Employers should be aware that any communication that tended to “interfere with, restrain, or coerce” and employee’s exercise of their Section 7 rights would be unlawful, including pre-employment letters.
  5. High bar for non-disparagement clauses. Confidentiality clauses that are narrowly tailored to prohibit someone from sharing proprietary or trade secret information for a period of time based on legitimate business justifications, may be considered lawful. However, non-disparagement provisions will be generally unlawful, except where they prohibit “maliciously untrue”
  6. A savings clause or disclaimer language may be useful to resolve vague terms, however, they will not necessarily cure overly broad provisions.
  7. Remedying violations. An unlawful confidentiality or non-disparagement provision will not necessarily render an entire severance agreement null and void. However, the guidance suggests that “employers should consider remedying such violations now” by contacting employees and notifying them that such provisions will not be enforced.

Finally, the guidance indicated that other common severance provisions could be problematic under McLaren Macomb, including non-compete, no solicitation, and no poaching clauses, as well as broad liability releases.

While the NLRB memo is not binding legal precedent, it will likely influence future enforcement actions. Employers should review any outstanding severance agreements, as well as employee handbooks, employee agreements, and other documentation to align with the guidelines.

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