The National Labor Relations Board (“NLRB”) returned to a longstanding precedent recently by holding that employers violate the National Labor Relations Act if they offer employees severance agreements that require employees to broadly waive their rights under the Act. This holding means that employers who use severance agreements should review them to make sure that the usual provisions that broadly require non-disparagement (the employee will not say anything negative about the employer, their products, etc.) and confidentiality are not overly broad. Employers should review their employee handbooks to check for similar overbreadth.
The severance agreement at issue in the case of McClaren Macomb contained overly broad non-disparagement and confidentiality clauses that the Board said tended to interfere with, restrain or coerce employees’ exercise of the Section 7 rights. Under Section 7, non-managerial and non-supervisor employees have the right to engage in concerted activity for mutual aid or protection. The Board held that non-disclosure provisions that contain a non-disparagement clause that advised the employees that they are prohibited from making statements that could disparage or harm the image of the employer and their officers, directors, employees, agents and representatives are unlawful. In addition, the confidentiality clause at issue advised employees that they are prohibited from disclosing the terms of the agreement to anyone except for a spouse or professional advisor, unless compelled by law to do so.
The ruling means that although severance agreements are not banned, they may need to be modified. Employers who use severance agreements should consider revising them to narrow the scope of non-disparagement and confidentiality provisions so that they pass muster under the Act. The general counsel for the NLRB has recently written that confidentiality clauses that are narrowly-tailored to restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications may be lawful. However, confidentiality clauses that have a chilling effect that precludes employees from assisting others about workplace issues or from communicating with the NLRB, a union, legal forums, the media or other third parties are likely unlawful.
In Conclusion, What should the astute employer do in light of the most recent NLRB ruling? It is not necessary to abandon severance agreements altogether. Rather, an employer should review their severance agreement forms and employee handbooks to make sure that the provisions relating to confidentiality and non-disparagement are consistent with the new rulings of the NLRB.
Please contact one of our experienced employment attorneys for additional assistance in reviewing your policies.