severance agreements

NLRB Limits Non-Disparagement and Confidentiality Clauses in Severance Agreements for Both Union and Non-Union Employees

By Thomas McKinney

In a recent holding by the National Labor Relations Board (NLRB) on the case of McLaren Macomb and Local 40 RN Staff Council, Office and Professional Employees, International Union (OPEIU), AFL-CI0, Case 07-CA-263041, there were significant implications for non-disparagement and confidentiality clauses that will severely limit the ability for employers to use these clauses pertaining to both union and non-union employees. Let’s take a closer look at the holding.

NLRB Limits Non-Disparagement and Confidentiality Clauses in Severance Agreements for Both Union and Non-Union Employees

In this recent case, 11 employees had been furloughed. Upon furlough, they were each presented with severance agreements. The agreements all offered different severance payments amount. All of the agreements, however, included similar releases, non-disparagement clauses, and confidentiality clauses. Furthermore, the agreements provided notable penalties such as injunctive relief and monetary sanctions should the employees breach the non-disparagement and confidentiality clauses.

The NLRB held that certain non-disparagement and confidentiality clauses included in severance agreements may violate the rights of union and non-union employees to engage in protected concerted activity pursuant to Section 7 of the National Labor Relations Act (NLRA). This is a reversal of NLRB precedent and marks the return to a standard for evaluating severance agreement provisions on their face to see if they run afoul of Section 7 rights.

This case can have significant implications for both employers and employees. As such, both should be aware of some key takeaways from this case. Note that these takeaways apply to both union and non-union workplaces, but may not apply to supervisors, managers, executives, independent contractors, and independent contractors, along with other groups generally not held responsible for the NLRA requirements. Those employers who are subject to the NLRA will want to take great care in drafting severance agreement language. In particular, employers will likely want to consider narrow language in such agreements in order to limit the possibility that the language of the agreement would limit the employee’s right to engage in protected activity.

Employers may want to take this a step further. In addition to the narrow language in such agreements, employers may want to include specific clauses in severance agreements that explicitly state a separating employee’s right to engage in protected activity. Such a provision may even specify such protected activity, such as an employee’s right to discuss the terms and conditions of employment with their coworkers.

This recent NLRB case has such significant implications for employers that the General Counsel for the NLRB even issued a memo with guidance on the implications of this decision. The guidance makes clear that there is not a complete ban on severance agreements. Severance agreements with overly broad provisions that restrain the rights of employees, however, will likely be held invalid. Specifically, defamation bans and confidentiality clauses are only likely to be found lawful if they are merited and contain narrow language. Even broad clauses requested by the employee are likely to be found unlawful.

Employment Law Attorneys

It is important to be clear on the implications of this recent NLRB decision. If you have questions, please reach out to the knowledgeable employment law team at Castronovo & McKinney. Contact us today.

About the Author
Tom McKinney is an experienced NJ Employment Lawyer in all major areas of labor and employment law, including discrimination, harassment, overtime violations, wage and hour claims, sexual harassment, wrongful discharge, Title VII, ADA, ADEA, FMLA, LAD, FLSA, and all other employment law claims. Tom is admitted to practice in the States of New Jersey and New York, United States District Court for the Eastern District of New York, Southern District of New York, District of New Jersey, and United States Court of Appeals for the Third Circuit. Prior to forming the firm, Tom practiced at Gibbons P.C. in Newark, NJ. If you have any questions regarding this article, contact Tom here today.