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Protecting Confidentiality May Be Illegal: How the NLRB is changing severance agreements

In February, the National Labor Relations Board (“NLRB” or “Board”) took aim at severance agreements, ruling that traditional confidentiality and non-disparagement clauses violate employees’ Section 7 rights. This is a departure from past NLRB rulings, which allowed employees to waive their Section 7 rights so long as there was no showing of unlawful conduct by the employer. The NLRB is again working to limit employers’ rights.

Section 7 of the National Labor Relations Act (“NLRA”) confers broad rights to non-supervisory employees to engage in “protected, concrete activity” for their “mutual aid and protection.” This generally includes discussing the terms and conditions of their employment both with other employees and with the public (“Section 7 rights”). This also includes the terms under which the employee separated from the employer.

In McClaren Macomb, the NLRB held that an employer’s inclusion of overly broad non-disclosure, confidentiality, and non-disparagement provisions in severance agreements infringe on the employee’s Section 7 rights. The Board found that the non-disclosure/non-disparagement provisions unlawfully prohibited communication among employees about their departure from their employer. Specifically, the Board took issue with: 

  1. The clauses being applied to the employer’s affiliated entities, officers, directors, employees, agents and representatives – this was way to broad a group in the eyes of the NLRB; and 
  2. The agreement was so broad it prohibited even disclosing unlawful provisions. 

The Board’s ruling applies to all statutory employees, whether or not they are represented by a union. The good news is supervisors and managers are not employees under the NLRA. Thus, supervisors and managers may still be subject to these clauses. 

At the moment, there are two unresolved questions. First, will this ruling retroactively apply to severance agreements? If so, the avalanche of litigation is unimaginable. Second, what will come of this case on appeal? Both of these questions are unresolved, but many anticipate the Federal courts, on appeal, will reign in this ruling. In the meantime, employers are advised to consult with labor and employment counsel to ensure their confidentiality and non-disparagement provisions are narrowly tailored and contain care outs for rights that cannot be waived. 

Brody and Associates regularly advises management on all issues involving unions, staying union-free, complying with the newest decision issued by the NLRB, and training management on how to deal with all these challenges.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.