The National Labor Relations Board in its recent McLaren Macomb decision issued February 21, 2023, reversed Trump-era precedent and held that a severance agreement and severance benefits that force an employee or former employee to give up their rights under Section & of the National Labor Relations Act are unlawful. To even present such an agreement is a violation of the Act because potential chilling effect it has on employees. Questions on the McLaren Macomb decision’s applicability to other scenarios soon followed.
In response, Jennifer A. Abruzzo, General Counsel for the National Labor Relations Board, issued Memorandum GC 23-05 on March 22, 2023. This memo provided guidance for how she wants Board attorneys to pursue future cases in light of the McLaren Macomb decision. The guidance specifies that severance agreements which waive an employee’s right to pursue employment claims can still be lawful. Naturally, waiving future claims has always been one of the primary objectives of such agreements. The guidance, though, specifies that severance agreements containing overly broad provisions that affect the rights of employees to communicate and “engage to improve their lot as employees” are unlawful under the NLRA. The referenced protected employee communication includes not only communication with fellow employees, but specifically communication with the National Labor Relations Board, a labor union, judicial, administrative, or legislative entities, the media, or other third parties. Such problematic provisions may include confidentially or non-disparagement provisions.
GC Abruzzo confirms that confidentiality clauses that are narrowly tailored to limit the distribution of proprietary information or trade secrets based on legitimate business concerns, as well as specific settlement amounts, can be lawful. Conversely, she believes confidentiality clauses that restrict an employee’s communication “to improve their lot,” even when speaking with the media or other third parties, are not lawful. Additionally, the guidance asserts only narrowly tailored non-disparagement provisions can be lawful when the provisions constrain defamatory statements about the employer by the employee, meaning statements that are maliciously untrue made with knowledge of their falsity or with reckless disregard.
Moreover, this guidance applies retroactively and exposes prior agreements to liability if unlawful provisions are maintained or enforced. Typically, an unlawful provision is considered void as opposed to nullifying an entire agreement. The General Counsel gently hinted that employers could proactively cure unlawful agreements by reaching out to current and former employees to convey that overly broad provisions are void and will not be enforced, though it is unclear whether such advice will gain any traction in practice. The liability for presenting an agreement with unlawful provisions in the past is still subject to a six-month statute of limitations.
It is important for employers to recognize that this guidance is not law, and the Board has not adopted it as such. It does give insight, though, into how Board attorneys may pursue NLRB cases moving forward. It also provides additional considerations for employers and attorneys to contemplate when drafting agreements or other employee-related materials in the future, as if we needed anything more to consider.