As discussed in my recent blog, the National Labor Relations Board (NLRB) in its McLaren Macomb decision has ruled that confidentiality clauses which prohibit an employee from disclosing the terms of her or his severance agreement and clauses that prohibit an employee from disparaging their employer as conditions to receipt of a severance payment violate such employee’s rights under sections 7 (essentially the right to organize) and 8(a)(1) (prohibiting employers from interfering with section 7 rights) of the National Labor Relations Act (NLRA).
The NLRB decision left unanswered several questions regarding its interpretation and application, creating uncertainty for both employers and employees regarding the inclusion of confidentiality and non-disparagement clauses in severance agreements. To address these questions and provide some guidance on how the NRLB will enforce the ruling, General Counsel (GC) Jennifer Abruzzo has released Memo 23-05 . The Memo provides instructions to the NLRB’s regional offices on how to issues arising from the McLaren Macomb decision. Set forth below is a review of certain of the more important commentary included in the Memo.
Can Severance Agreements Still be Provided to Employees?
Yes. The McLaren Macomb decision does not prohibit severance agreements. However, as stated in the Memo, “lawful severance agreements may continue to be proffered, maintained, and enforced if they do not have overly broad provisions that affect the rights of employees to engage with one another to improve their lot as employees.”
Are All Confidentiality Provisions Now Prohibited in Severance Agreements?
No. The Memo confirms that “[c]onfidentiality 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 considered lawful.” Employers should note, however, that confidentiality clauses which have a “chilling effect that precludes employees from assisting others about workplace issues and/or from communicating with the Agency, a union, legal forums, the media or other third parties” are unlawful.
Are All Non-Disparagement Provisions Now Prohibited in Severance Agreements?
Again, no. As stated in the Memo, severance agreements may include “a narrowly-tailored, justified, non-disparagement provision that is limited to employee statements about the employer that meet the definition of defamation as being maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity, may be found lawful.” In other words, a clause which prohibits an employee from making negative, but truthful, statements or from expressing a negative opinion regarding an employer or its products will violate the McLaren Macomb decision.
Is the Ruling Retroactive?
As noted in our prior blog, NLRB decisions are generally presumed to be retroactive unless retroactivity would result in an injustice or be unfair to the employer. The Memo notes that if the NLRB had determined that there was manifest injustice requiring prospective application, it would have stated so in decision, such that retroactivity does apply to the rulings. The Memo further stated that while an unlawful proffer of a severance agreement may be subject to the six-month statute of limitation noted in our blog, “maintaining and/or enforcing a previously-entered severance agreement with unlawful provisions that restrict the exercise of Section 7 rights continues to be a violation and a charge alleging such beyond the Section 10(b) period would not be time-barred.”
Does a Prohibited Confidentiality or Non-Disparagement Clause Invalidate the Entire Agreement?
In a bit of good news for employers, the Memo states that such clauses which are found to be unlawful will likely not invalidate the entire agreement. The Memo notes that the NLRB “generally make decisions based solely on the unlawful provisions and would seek to have those voided out as opposed to the entire agreement, regardless of whether there is a severability clause or not.”
How Does McLaren Macomb Apply to Supervisors?
As noted in our blog, certain categories of employees are not covered by section 7 of the NLRA, most importantly supervisors and managers with the authority to hire, fire, set pay and discipline workers. While the Memo confirms that supervisors are generally not protected by the NLRA, the NLRA does protect a supervisor who is retaliated against, such as being fired, because he or she is refusing to act on their employer’s behalf in committing an unfair labor practice against employees, in other words, they are refusing to violate the NLRA per their employer’s directives. Accordingly, it would violative the NLRA for an employer to retaliate against a supervisor who refuses to proffer an unlawfully overbroad severance agreement.
What if the Employee Requests the Prohibited Provision?’
The Memo provides that the identity of the party requesting an overly broad provision is irrelevant – the NLRB “protects public rights that cannot be waived in a manner that prevents future exercise of those rights regardless of who initially raised the issue.”
What Actions Should Employers Take?
In addition to the actions mentioned in our prior blog, employers should not seek to enforce any confidentiality or non-disparagement provisions prohibited by the McLaren Macomb decision. The Memo also states that while such action may not cure a technical violation of an unlawful proffer of a severance agreements, employers may seek to remedy such violations by contacting employees subject to severance agreements with overly broad provisions and informing them that such provisions are void and that the employer will not seek to enforce such provisions or pursue any penalties for breaches of them. Such conduct could form the basis for consideration of a merit dismissal if a meritorious charge solely alleging an unlawful proffer is filed by an employee.
As noted in our prior blog, the McLaren Macomb decision remains subject to appeal, and further direction from the courts may be forthcoming on this issue, which may differ from the decision itself or the interpretations set forth in the Memo. In addition, the Memo does not have the force of law and is not binding on any party other than the NLRB Regions. Unless and until further action is taken with regard to the decision, the memo is helpful in understanding how the NLRB will most likely apply the McLaren Macomb decision to severance agreements, and employers should refer to the decision and the Memo in enforcing existing, and drafting new, severance agreements and other compliance efforts.
For further information on the Memo or guidance on drafting or revising your severance agreements, please contact David Paseltiner.