NLRB Issues Guidance on Severance Agreement Restrictions

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APPLIES TO

All Employers with Employees Subject to the NLRA

EFFECTIVE

March 22, 2023

  

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Quick Look

  • Severance agreements are permitted to restrict defamation, but cannot include broad nondisparagement provisions.
  • Severance agreements may keep the financial terms confidential.
  • Employers may continue to protect proprietary, trade secret information.
  • The McLaren Macomb decision is applied retroactively.

Discussion

As previously reported, in McLaren Macomb, the National Labor Relations Board (NLRB) recently returned to longstanding precedent stating that employers may not offer employees severance agreements that require employees to broadly waive their rights under the National Labor Relations Act (NLRA), including provisions that would restrict disparagement of the employer or disclosing the terms of the agreement itself.

On March 22, 2023, NLRB General Counsel (GC) Jennifer Abruzzo issued a Memorandum (GC 23-05), in which she provided guidance on the decision. First, severance agreements are not prohibited. Second, she confirmed that limited confidentially and non-disparagement clauses may still be lawful. Confidentiality clauses that are narrowly-tailored to protect proprietary or trade secret information are still lawful. Also, a confidentiality clause that prohibits an employee from generally disclosing the financial terms of settlement is still appropriate. The Memorandum clarified that non-disparagement provisions must be limited to prohibiting defamation (i.e., intentional falsehoods).

Importantly, GC Abruzzo indicated that the McLaren Macomb decision applies retroactively. She went so far as to recommend that employers notify all previous severance agreement parties that overly broad provisions are void and the employer will not seek to enforce them. However, the Memorandum states that the NLRB will generally seek to void only those provisions it determines to be unlawful, instead of voiding the entire agreement. Employers should consult with legal counsel before addressing existing agreements.

 

Action Items

  1. Review the NLRB announcement and Memorandum here.
  2. Have severance agreements reviewed by legal counsel for compliance.
  3. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

 

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase