Non-Disparagement and Non-Disclosure/Confidentiality Clause Struck Down
In late February, the National Labor Relations Board (NLRB) issued a decision in McLaren Macomb, holding that the National Labor Relations Act (NLRA) prohibits employers from including non-disparagement and non-disclosure clauses in severance agreements. So, here is a quick breakdown of how this might affect employers.
Non-Disparagement
Non-Disparagement clauses are commonplace in severance agreements. A typical non-disparagement clause provides that the employee agrees to refrain from bad-mouthing the employer in exchange for the severance payment. The NLRB reasoned in its decision that such a provision would prohibit former employees from speaking with current employees about working conditions and thus interfere with workers’ rights under Section 7 of the NRLA*. 1 The NLRB did not discuss whether there are situations in which a non-disparagement provision would be acceptable or whether a carve-out for Section 7 activities would
Non-Disclosure
Almost every severance agreement includes a requirement to keep the terms of the agreement confidential. There are obvious reasons why an employer wouldn’t want a former employee disclosing to the world that the employer agreed to pay them a large sum after the employee threatened to bring a lawsuit or claimed their termination was motivated by discrimination or retaliation. Such information will encourage other lawsuits or claims. It could also create resentment or tension with current employees. The NLRB, however, held that non-disclosure provisions interfere with employee rights under Section 7. So again, it is unclear whether a carve-out for communications in furtherance of Section 7 rights would guarantee enforceability.
Significantly, this prohibition on non-disparagement and confidentiality clauses does not apply to Managers, Supervisors, Executives, and Independent Contractors.
So, employers should review their form severance agreements and determine what changes, if any, are required after consideration of one’s risk tolerance and business needs.
*Section 7 guarantees workers “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”