What All Employers Need to Know About the NLRB General Counsel's Memorandum Providing Guidance on Severance Agreements

On March 22, 2023, Jennifer Abruzzo, General Counsel of the National Labor Relations Board (“NLRB”), issued a memo to provide guidance on the scope and effect of the NLRB’s recent decision in McLaren Macomb.  The NLRB ruled in McLaren Macomb that an employer engaged in an unfair labor practice under the National Labor Relations Act (the “Act”) when it offered employees severance agreements containing broad non-disparagement and confidentiality provisions.  The NLRB considered such previsions unlawful because they tend to have a chilling effect on the ability of employees to engage in protected concerted activity under Section 7 of the NLRA.

Before reviewing the highlights of the General Counsel memo, it is important to understand why NLRB guidance matters to all employers, including those with non-union employees.  The NLRA applies to most workplaces and employees, regardless of whether the workplace has union employees.  Specifically, the protections of Section 7 of the NLRA, which provide rights to employees to engage in protected concerted activities, apply to non-union employees in non-supervisory roles.  Protected concerted activity generally refers to an employee’s right to act with co-workers to address work-related issues.  

Our key takeaways from the NLRB General Counsel memo are as follows:

  1.  McLaren Macomb Does Not Ban Severance Agreements.  Severance agreements may continue to be used so long as they do not contain overly broad provisions that affect the rights of employees to engage with one another and improve their working conditions. 
  2. Narrowly Tailored Non-Disparagement and Confidentiality Clauses Remain Lawful.  McClaren Macomb does create a general ban on the use of non-disparagement and confidentiality provisions.  Non-disparagement provisions may be lawful if they are narrowly tailored to prohibit an employee’s defamatory statements about an employer that are “maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard of their truth or falsity.”  Likewise, confidentiality provisions may be lawful if they are “narrowly tailored to restrict the dissemination of proprietary or trade secret information for a period based on legitimate business justifications.”
  3. The Mere Proffer of a Severance Agreement that Conditions the Receipt of Severance Benefits on the Waiver of Statutory Rights is Enough to Find that an Employer Violated the Act.  An employer commits an unfair labor practice if a severance agreement offered to an employee contains an unlawful provision requiring the broad wavier of employee rights under the NLRA, regardless of whether the employee signs the agreement. 
  4. Under Certain Circumstances, Severance Agreements With Supervisors May Be Unlawful.  Generally, supervisors are not covered by the protections of the Act.  However, the General Counsel clarified that the Act does protect a supervisor who is retaliated against for refusing to act on their employer’s behalf in committing an unfair labor practice, which would include retaliation against a supervisor “who refuses to proffer an unlawfully overbroad severance agreement.”  General Counsel Abruzzo further stated that she believes the Act protects a supervisor in situations where their employer offers them a severance agreement that prevents the supervisor from “participating in a Board proceeding.”
  5. OM 07-27 Remains In Effect.  OM 07-27, a memorandum issued by the NLRB Office of the General Counsel in 2006, provided guidance for acceptable terms of non-Board settlements.  For instance, in OM 07-27, the Office of General Counsel states that a waiver of the right to file NLRB charges on future unfair labor practices is unlawful, while a release resolving current claims is appropriate.  The Office of General Counsel also states in OM 07-27 that a confidentiality clause prohibiting an employee from generally disclosing the financial terms of settlement are normally acceptable.  General Counsel Abruzzo’s recent memo states that OM 07-27 is consistent with the McLaren Macomb decision and remains in effect.
  6. The NLRB’s Decision in McLaren Macomb Applies Retroactively.  Maintaining or enforcing a severance agreement with unlawful provisions that predates the McLaren Macomb decision is a continuing violation of the Act and is not subject to the Act’s six-month statute of limitations.  The General Counsel encourages employers to consider notifying their former employees that overly broad provisions in their severance agreements are null and void and will not be enforced.
  7. The Memo Foreshadows Future Action to Broaden the Impact of Mclaren Macomb Beyond Non-Disparagement and Confidentiality Provisions.  The General Counsel lists other potentially problematic provisions that are commonly used in severance-related agreements, including: “non-compete clauses; no solicitation clauses; no poaching clauses; broad liability releases and covenants not to sue that go beyond the employer and/or may go beyond employment claims and matters as of the effective date of the agreement; cooperation requirements involving any current or future investigation or proceeding involving the employer as that affects and employee’s right to refrain under Section 7[.]”

It’s important to remember that the General Counsel’s memo is not the law or legally binding on employers.  Nonetheless, in light of the guidance provided in the memo, employers should be wary of reusing template severance agreements.  Severance agreements should already include language reserving an employee’s right to file a charge or complaint with, or participate in an investigation with, the EEOC or other local, state or federal agency, or OSHA.  Employers should consider adding similar language to severance agreements that makes clear that the employee is not waiving their rights under the NLRA.  Employers should review their existing severance and other employee agreements with counsel to ensure that the agreements do not contain provisions that would be deemed to unlawfully interfere with employees’ rights under the Act. 

For more information about this or any other employment concerns, please contact Jaime Luse or any member of the employment law practice group.

This information has been prepared by Tydings for informational purposes only and does not constitute legal advice.