National Labor Relations Board Issues Further Guidance On Employers’ Limited Ability To Obtain Confidentiality And Non-Disparagement Agreements

In February, the National Labor Relations Board (NLRB) ruled in McLaren Macomb and Local 40 RN Staff Counsel, Office and Professional Employees, International Union (OPEIU), AFL-CIO, Case No. 07-CA-263041, that employers may not issue severance agreements that require employees covered by the National Labor Relations Act (the “NLRA”) to agree to broad confidentiality and non-disparagement provisions.?The NLRA covers most private-sector employees, including non-union employees, but does not cover those who qualify as supervisors.

In the McLaren case, the invalidated confidentiality provision of the severance agreement prohibited the employees from disclosing the terms of the agreement to any third party other than their spouses or professional advisors or unless legally compelled to do so by a court or administrative agency. The non-disparagement provision prohibited the employees from making any statements to other McLaren Macomb employees or the general public “which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.” The NLRB ruled that both provisions were overly broad and interfered with the employees’ rights under Section 7 of the NLRA.

Recently, the General Counsel of the NLRB provided further guidance on the impact of the McLaren ruling to employers in a memo to its Field Offices.?Specifically, the General Counsel advised that:

• Employees Cannot Waive Their NLRA Rights: Employee preference for confidentiality or non-disparagement provisions does not save an overbroad confidentiality or non-disparagement provision, as employees may not waive their rights under the NLRA.?
• Not Limited To Severance Agreements: McLaren applies not only to severance agreements but also to “other employer communications with employees,” including but not limited to pre-employment or offer letters. While it is unclear whether the McLaren holding encompasses settlement agreements, we expect this Board to extend the reach of McLaren to settlement agreements.?
• Confidentiality Provisions: Confidentiality clauses that are narrowly tailored to restrict only the dissemination of proprietary or trade secret information for a limited time period are still permitted.?Confidentiality agreements that prohibit an employee from communicating with third parties about the workplace or the nature and terms of severance are unlawful.
• Non-Disparagement Provisions: Non-disparagement provisions should be limited to prohibiting statements by the employee about the employer that meet the legal standard of defamation. Non-disparagement provisions that cover non-defamatory statements are violative of the NLRA because?“public statements by employees about the workplace are central to the exercise of employees’ rights under the [National Labor Relations] Act.”
• Savings Clause: A “savings clause” stating that the intent is not to limit the employee’s rights under the NLRA does not suffice to prevent restrictive provisions of a severance agreement from being unlawful.
• Retroactivity: The McLaren decision applies retroactively to agreements issued prior to February 21, 2023, the date of the decision. It applies to both former and current employees.
• Does Not Void Entire Agreement: If an agreement contains an unlawful provision, the McLaren standard would nullify only the unlawful provision, not the entire agreement.

Importantly, because the NLRA does not apply to supervisors, executives, managers and independent contractors, the McLaren ruling does not apply to confidentiality and/or non-disparagement provisions applicable to those employees.?However, it does protect such individuals from retaliation in the event they refuse to issue agreements containing provisions that violate the NLRA.?

The NLRB did not directly address additional penalties that employers could face for violating McLaren, but these would likely include remediation, compensatory damages and attorney’s fees.

Employers should revisit their template agreements for non-supervisory employees that contain confidentiality and non-disparagement clauses and consider modifications to achieve compliance with the NLRA.

Meredith Cavallaro

Head of the Firm's Employment Practice

[email protected]

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