National Labor Relations Board (NLRB) General Counsel issues Memorandum Regarding Confidentiality and Non-Disparagement Provisions Contained in Severance Agreements.

June 26, 2023 Employment Law

In March 2023, the NLRB General Counsel issued Memorandum GC 23-05, which provides guidance regarding how to apply the NLRB’s February 21, 2023 decision in McLaren Macomb, 372 NLRB No. 58 (2023). In McLaren Macomb, the NLRB found that an employer offering a severance agreement to a non-management employee containing overly broad confidentiality and non-disparagement provisions violated an employee’s rights under Section 7 of the National Labor Relations Act (“NLRA”) which generally encompass an employee’s ability to engage in concerted activities for the purpose of collective bargaining or other mutual aid or protection.

In issuing its ruling in McLaren Macomb, the NLRB overruled two prior decisions which permitted an employer to include broad confidentiality and non-disparagement clauses in a severance agreement so long as the agreement was not coercively obtained or under circumstances in violation of the NLRA. Accordingly, McLaren Macomb holds that broad confidentiality and non-disparagement provisions in a severance agreement could result in a violation of the NLRA regardless of the manner in which the agreement was presented to the employee.

While the NLRB did not establish a bright-line rule prohibiting confidentiality and non-disparagement covenants in severance agreements with covered employees, and the General Counsel’s guidance generally describes how narrowly tailored provisions could still be lawful, the General Counsel emphasized:

  • that language that has a chilling effect on an employee’s ability to assist others with workplace issues would violate the NLRA,
  • the importance of public statements by employees as a means of exercising Section 7 rights, and
  • implied that only a non-disparagement clause limited to statements that are “maliciously untrue” (i.e., made with knowledge of their falsity or reckless disregard for their truth or falsity) may be deemed lawful under McLaren Macomb.

While the McLaren Macomb decision did not address the impact of a general disclaimer reserving an employee’s Section 7 rights, the General Counsel’s guidance briefly noted that while such language may help resolve ambiguities, it may not necessarily cure overly broad confidentiality or non-disparagement clauses.

Generally speaking, these types of NLRB decisions do not impact agreements with management-level employees, as employees with supervisory authority are exempt from coverage under Section 7 of the NLRA. Therefore, McLaren Macomb will generally not impact the continued use of confidentiality and non-disparagement provisions in severance agreements or other employment arrangements with executives and other members of management.