On February 21, the National Labor Relations Board (NLRB) issued an opinion with significant implications for confidentiality and non-disparagement provisions in employers’ severance and release agreements with departing employees. The National Labor Relations Act (NLRA) protects the right of private sector employees (excluding supervisors) to discuss the terms and conditions of their employment, even if they are not part of a union or engaged in collective bargaining activities.
In McLaren Macomb, the NLRB reviewed severance agreements provided by an employer to a group of permanently-furloughed employees. The NLRB specifically analyzed two broad provisions in the severance agreements: one requiring the employees to keep the terms of the agreement confidential other than disclosing to a “spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction;” and the other prohibiting the employees from disparaging the employer.
The severance agreements at issue did not have a carve out clarifying that employees could still bring or participate in claims before administrative agencies like the EEOC or NLRB despite these provisions.
The NLRB held the non-disparagement and confidentiality provisions violated the National Labor Relations Act because they “had a reasonable tendency to interfere with, restrain, or coerce employees’ exercise of their Section 7 rights.” The NLRB found that the mere offering of the agreement with the unlawful provision violated the NLRA.
Interestingly, the NLRB also said, “a severance agreement is unlawful if it precludes an employee from assisting coworkers with workplace issues concerning their employer, and from communicating with others, including a union, and the Board, about his employment.” It took issue with the confidentiality provision because it would broadly prohibit an employee “from discussing the terms of the severance agreement with his former coworkers who could find themselves in a similar predicament facing the decision whether to accept a severance agreement.” This signals that carve outs preserving employees’ rights to file and participate and file complaints with administrative agencies may not go far enough in the eyes of the NLRB, and that the NLRB expects employees to be permitted to discuss the terms of their severance offers with co-workers when those discussions are arguably covered by NLRA Section 7 protections.
In light of this NLRB opinion and recent state and federal law placing limitations on confidentiality and non-disparagement provisions in severance, settlement, and release agreements, employers should contact counsel to review their form severance or separation and release agreements to ensure they are not overbroad and comply with state and federal limitations.