NLRB Finds that Broad Confidentiality and Non-Disparagement Clauses in Severance Agreements Violate the Federal NLRA

On February 21, 2023, the National Labor Relations Board (“NLRB”) issued a decision in McLaren Macomb, 372 NLRB No. 58 (2023). The decision held that overly broad confidentiality and non-disparagement provisions unlawfully interfere with rights guaranteed by the federal National Labor Relations Act (“NLRA”). The Board’s decision significantly restricts employers’ use of non-disparagement and confidentiality provisions in agreements with those employees whose collective bargaining rights are covered by the NLRA.

The decision involved furloughs of eleven (11) union employees at a Michigan hospital. The employer issued each employee being furloughed a “Severance Agreement, Waiver and Release.” In exchange for severance payments, the employees who signed the agreement agreed to two provisions requiring confidentiality about the terms of the agreement and prohibiting disparagement of the hospital. The provisions limited employees’ communications with “any third person”. The agreements were presented directly to the employees, rather than to their union representatives, and the hospital never gave the union notice of the furloughs or an opportunity to bargain over the furloughs. The union challenged the hospital’s furloughs and use of the severance agreement. After an administrative law judge found that the hospital violated the Act, the case was appealed to a panel of the NLRB.

The NLRB held that the hospital violated the Act by not only failing to bargain with the union and dealing directly with employees, but also by offering the employees a severance agreement containing overly broad confidentiality and non-disparagement provisions. The NLRB found that the confidentiality provisions applied “to any third person” and, therefore, required employees to broadly give up rights protected by the NLRA, including the rights to engage in protected concerted activity, such as discussing terms and conditions of employment with coworkers and union representatives. The NLRB further ruled that the non-disparagement clause chilled employees’ ability to assist with its investigation and with the litigation of unfair labor practice charges by improperly prohibiting employees from making negative or potentially harmful or disparaging statements to their former coworkers.

Importantly, the NLRB’s concerns with the severance agreement in McLaren Macomb only apply to employees who enjoy rights under Section 7 of the NLRA. Managerial employees, for example, do not have Section 7 rights and the NLRB ruling does not affect those employees’ ability to execute these types of confidentiality and non-disparagement agreements.

In the wake of McLaren Macomb, private sector employers should review their severance agreements to ensure that they do not contain a confidentiality or non-disparagement provision that restricts any covered employee’s rights under the NLRA.

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This update is provided for informational purposes only and should not be considered legal advice.