NLRB’s General Counsel Issues Guidance Concerning McLaren Macomb
Employers may recall that the National Labor Relations Board (“NLRB” or the “Board”) recently issued a decision restricting the ability of employers to include broad non-disparagement and confidentiality clauses in severance agreements if such clauses have a reasonable tendency to interfere with, restrain, or coerce employees in the exercise of their rights under Section 7 of the National Labor Relations Act (“NLRA” or the “Act”). Late last month, NLRB General Counsel (“GC”) Jennifer Abruzzo issued Memorandum GC 23-05 (the “Memorandum”), detailing how her office is approaching common questions related to the decision.
The Memorandum affirms that the McLaren decision does not ban all severance agreements; rather lawful severance agreements may continue to be used and enforced as long as they do not include “overly broad provisions that affect the rights of employees to engage with one another to improve their lot.” If such overbroad provisions are included, neither the circumstances surrounding the agreement, nor whether the employee actually signs the agreement, matters in determining whether there was a violation of the NLRA, as the GC notes that an employer can have no legitimate interest in maintaining facially unlawful provisions in a severance agreement and that the proffer itself of such provisions is inherently coercive. These provisions remain unlawful even if the employee is the one who has asked for the inclusion of a broad confidentiality or non-disparagement clause.
The Memorandum also addresses how broadly the GC views the scope of the decision. For example, the GC provides that this decision has an expansive retroactive application. The GC acknowledges that typically an unlawful settlement agreement is subject to a six-month statute of limitations under Section 10(b) of the NLRA. However, the GC considers maintaining and/or enforcing severance agreements that include unlawful provisions restricting an employee’s right to exercise their Section 7 rights to be a continuing violation. Therefore, according to the GC, any claim alleging the existence or enforcement of an unlawful agreement would not be time-barred, even if the agreement was offered and executed more than six-months ago. However, the GC contemplates that employees may mitigate against a potential violation for an unlawful proffer by contacting employees subject to severance agreements with overly broad provisions and advising them that such provisions are null and void.
Most notably, the GC provides that overly broad provisions in any employer communication to employees that tend to interfere with, restrain or coerce an employee’s exercise of Section 7 rights are unlawful if they are not narrowly tailored to address a special circumstance justifying the impingent on workers’ rights. However, the guidance provides no clarity or specificity on what is considered “narrowly tailored” and what is considered a “special circumstance.” The GC specifically calls out other provisions, some of which are often included in severance agreements, including non-compete clauses; no solicitations clauses; no poaching clauses; broad liability releases; covenants not to sue that go beyond the employer and/or beyond the employment claims and matters as of the effective date of the agreement; and cooperation clauses involving any current or future investigation or proceeding involving the employer.
The Memorandum also offers guidance on the parties to whom the GC envisions this decision applies. The GC acknowledges that while the NLRA does not typically protect supervisors, it does protect a supervisor who is retaliated against for refusing to engage in an unfair labor practice. And in the context of this decision, she maintains that it would be a violation of the NLRA for an employer to retaliate against a supervisor who refuses to proffer an unlawfully overboard severance agreement and for an employer to proffer a severance agreement to a supervisor who engaged in conduct such as participating in a Board proceeding. The GC also affirms that former employees are entitled to the same protections under the NLRA as current employees, and that the McLaren decision reiterated that Section 7 Rights do not depend on the existence of an employment relationship between the employee and employer. As examples, the GC states that former employees may provide evidence to the NLRB and share information on the working conditions they experienced.
The GC also addresses confidentiality provisions and provides guidance on how to structure lawful provisions. More specifically, she provides that a confidentiality provision may be considered lawful if it is narrowly tailored to restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications. However, her definitions of “narrowly-tailored” and “legitimate business justifications” remain open as she does not provide any examples or further commentary on these requirements. Confidentiality provisions which preclude employees from assisting others with workplace issues and/or from communicating with the NLRB, a union, legal forums, the media or other third parties are considered unlawful. Given the direction of recent Board decisions, it may also be the case that provisions which do not on their face include such explicit prohibitions may be read broadly to have such a meaning. The Memorandum does make clear, however, that OM 07-27, which found a confidentiality clause that prohibited an employee from generally disclosing the financial terms of settlement to be appropriate, remains in effect. As for non-disparagement provisions, the GC advises that lawful non-disparagement clauses will be narrowly-tailored, justified, and limited to employee statements about the employer that meet the GC’s definition of defamation, which is narrowly defined as being “maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity.” Non-disparagement clauses that apply not only to the employer, but also to the employer’s parents, affiliates, officers, representatives, employees, directors and agents and which encompass all disputes and issues are also likely to be found to be overbroad.
While many employers rely on “savings clauses” to remedy any provision that could be considered by the Board to be unlawful, the GC provides that such “savings clauses” and disclaimers will not necessarily cure overly broad provisions in a severance agreement. However, the GC does provide what she would consider an appropriately prophylactic statement of rights that could be used in severance agreements. This statement is incredibly broad and includes advising employees that they have the right to engage in: “(1) organizing a union to negotiate with their employer concerning their wages, hours, and other terms and conditions of employment; (2) forming, joining, or assisting a union, such as by sharing employee contact information; (3) talking about or soliciting for a union during non-work time, such as before or after work or during break times, or distributing union literature during non-work time, in non-work areas, such as parking lots or break rooms; (4) discussing wages and other working conditions with co-workers or a union; (5) taking action with one or more co-workers to improve working conditions by, among other means, raising work-related complaints directly with the employer or with a government agency, or seeking help from a union; (6) striking and picketing, depending on its purpose and means; (7) taking photographs or other recordings in the workplace, together with co-workers, to document or improve working conditions, except where an overriding employer interest is present; (8) wearing union hats, buttons, t-shirts, and pins in the workplace, except under special circumstances; and (9) choosing not to engage in any of these activities.”
The GC does provide a small concession to employers by noting that an entire severance agreement will likely not be rendered null and void if any provision, including those discussed above, is found to be overbroad and unlawful, regardless of the existence of a severability clause.
The McLaren decision, and now the GC Memorandum, show how stringently the NLRB and its enforcement arm will examine severance agreements, and other employer policies and agreements which the Board feels may implicate employees’ Section 7 rights. Employers, however, should be mindful of the potential for an appeal in this matter and/or that subsequent court decisions may not support the broad reading of the Board and the General Counsel. Ultimately, employers should discuss with counsel their options on how to best address the McLaren decision and the related guidance, and review risk factors to determine the next best steps in terms of revising the language of any agreements and/or engaging in any mitigation efforts related to past agreements. If you have any questions about the Board ruling, the Memorandum, or need assistance amending your severance agreements, please contact Caroline Secola at csecola@fglawllc.com or any other attorney at the Firm.
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