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In the Apple TV+ show Severance, employees of Lumon Industries may agree to a "severance" program in which non-work memories are separated from work memories. Outside of work, these Lumon Industries employees cannot discuss what happened at work because they have no memory of it. While Severance’s technology is fictional, employers frequently seek a similar result when offering severance agreements to departing employees. These agreements include a variety of provisions including confidentiality, release of claims, and non-disparagement provisions that restrict what the employee may say about their work experiences and terms of their departure. The National Labor Relations Board (Board) and the Board’s General Counsel recently imposed significant restrictions on the use of such provisions.
 
On February 21, 2023, the Board decided in McLaren Macomb, 372 NLRB No. 58 that severance agreements requiring employees to “broadly waive their rights” under the National Labor Relations Act, including prohibiting employees from making disparaging statements about their employer and disclosing terms of the agreement, are unlawful. More recently, the Board’s General Counsel offered answers to a number of questions about the scope of the McLaren Macomb restrictions and additional guidance on severance agreements.
 
How McLaren Macomb Impacts Severance Agreements
 
We have previously discussed employees’ rights under Section 7 of the Act and the General Counsel’s efforts to expand and protect those rights after the Trump Board limited them. Prior to McLaren Macomb, the Trump Board decided that severance agreements including promises as to confidentiality, non-disparagement, and non-participation in claims against the employer were lawful unless the severance agreements resulted from a discharge that violated the Act or the employer “harbored animus” toward the exercise of Section 7 activity. Baylor University Medical Center, 369 NLRB No. 43 (2020); IGT d/b/a Int’l Game Tech., 370 NLRB No. 50 (2020).
 
The Board overruled the Trump Board’s decisions in McLaren Macomb with respect to severance agreements involving employees covered by the Act. Under McLaren Macomb, employers may not offer employees a severance agreement that:

• Requires confidentiality about the agreement and prohibits disclosure to any third person.
• Prohibits employees from disclosing “information, knowledge or materials of a confidential nature” of which the employee had from employment.
• Prohibits employees from making statements “to employees or to the general public which could disparage or harm the image” of the employer.
• Otherwise coerces the employees away from participating in a Board investigation, filing an unfair labor charge, or communicating with a union about the agreement.

 
It does not matter if the employer enforces none of the unlawful provisions or if the employee rejects the severance agreement. It is unlawful for an employer to simply offer an employee a severance agreement with prohibited language.
 
The Board’s decision left a number of significant unanswered questions. On March 22, the Board’s General Counsel, Jennifer Abruzzo, offered her answers to some these important questions:

• McLaren Macomb does not prohibit employers from seeking an ordinary release of employment claims in a severance agreement. An employer may ask an employee to release “employment claims and only as to claims arising as of the date of the agreement” in a severance agreement.
• McLaren Macomb does not prohibit employers from requiring employees to keep the amount of a severance payment confidential.
• Any offer of an overly broad severance agreement is unlawful. It does not matter if the employee does not sign the severance agreement, if the employee requests confidentiality or non-disparagement provisions in a severance agreement, or if a union representing employees agreed to the provisions when bargaining over them on behalf of employees.
• McLaren Macomb applies retroactively to severance agreements entered into before February 21, 2023. While employees offered unlawful severance agreements over six months ago may be barred under the Act’s statute of limitations from filing an unfair labor practice charge based on the offer, they may file unfair labor practice charges within six months after an employer enforces or threatens to enforce an unlawful severance agreement.
• Unlawful and unenforceable confidentiality and non-disparagement provisions in a severance agreement likely will not render the entire severance agreement unenforceable.

At a recent American Bar Association conference held in late March 2023, Ms. Abruzzo told conference attendees that there were numerous other “boiler-plate” terms, i.e., standard contract provisions, that were also on her radar because she believed they also chilled employees’ exercise of their rights under the Act.
 
 
Takeaways for Employers
 
Employers who have entered into severance agreements with former employees in the last six months should consider informing them that overly broad provisions deemed unlawful by McLaren Macomb are void and will not be enforced. The General Counsel suggested that, if an employer proactively contacts former employees in this way, it may warrant dismissal of an otherwise meritorious unfair labor practice charge based on the offer of the (now) unlawful severance agreement. Employers should consult with an attorney and weigh a number of factors (e.g., timing of the offers and whether the severance agreements are overly broad) before proactively admitting it offered unlawful severance agreements to employees.
 
Employers considering offering severance agreements to employees after McLaren Macomb should be pragmatic. Confidentiality and non-disparagement agreements are rarely enforced in practice. The general purpose of these agreements is to chill employee speech about the employer’s business. It is unsurprising that broad confidentiality and non-disparagement provisions in severance agreements with employees violate the ever-expanding protection of employee speech under Section 7. Pragmatic employers should avoid, or at least narrowly tailor, confidentiality and non-disparagement agreements with employees because of the realities of enforcing these agreements, and the potential for violating the Act. This likely means that one-size-fits-all generic severance agreements should no longer be used. Instead, employers may, consistent with McLaren Macomb, consider restricting employee speech in a severance agreement in these ways:

• Section 7 applies to employees, not statutory supervisors. McLaren Macomb does not prohibit employers from including non-disparagement or confidentiality provisions in severance agreements with employees who meet the definition of “supervisors” under the Act. Instead of confirming this unobjectionable limit of McLaren Macomb, the General Counsel speculated about a hypothetical employer that retaliates against a supervisor for refusing to violate the Act (which is already unlawful) and, in connection with the retaliation, offers the supervisor an overly broad severance agreement that seeks to prohibit the supervisor from participating in a Board proceeding. It is safe to say that – except for in the General Counsel’s unlikely hypothetical – employers may offer severance agreements to statutory supervisors without McLaren Macomb’s limits.
• Section 7 does not protect reckless or maliciously untrue statements by employees. However, under McLaren Macomb, any language in a severance agreement that coerces employees from engaging in rights under the Section 7 would violate the Act. The sloppily-worded provision that seeks to prohibit reckless or maliciously untrue statements by employees may still violate the Act under McLaren Macomb. While cautioning that a non-disparagement provision may easily slip over into overly broad, the General Counsel confirmed that “a narrowly-tailored, justified, non-disparagement provision that is limited to employee statements about the employer that meet the definition of defamation as being maliciously untrue . . . may be found lawful.”
• Section 7 does not protect employees who disclose trade secrets or other confidential information that the employer is privileged to conceal. A severance agreement may include restrictions on disclosure of trade secrets or other confidential information but employers should ensure these provisions are narrowly tailored to ensure enforceability. The severance agreement found unlawful in McLaren Macomb broadly prohibited employees from disclosing “information, knowledge or materials of a confidential nature” of which the employee had from employment. The General Counsel also confirmed that “[c]onfidentiality clauses that are narrowly-tailored to restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications may be considered lawful.”

 
If you have questions about severance agreements or the McLaren Macomb decision, please contact your labor and employment attorney at Spilman.
 

 

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