NLRB Continues to Put the Squeeze on Confidentiality and Non-Disparagement Clauses
March 24, 2023
Stroock Client Alert
By: Howard S. Lavin, Elizabeth E. DiMichele
On March 22, 2023, Jennifer Abruzzo, the General Counsel of the National Labor Relations Board (NLRB or the Board), issued guidance addressing the NLRB’s decision in McLaren Macomb, 372 N.L.R.B. No. 58 (Feb. 21. 2023), which held that simply proffering severance agreements with overbroad non-disparagement and confidentiality language, in and of itself, is an independent violation of Section 7 of the National Labor Relations Act (NLRA or the Act). Please see our prior Stroock Client Alert for further details.
Section 7 Rights
Under Section 7 of the NLRA, employees within the meaning of Section 2(3) of the Act (statutory employees) have the right to join a union, bargain collectively through representatives of their own choosing, and engage in other protected concerted activities. The right to engage in protected concerted activities to discuss or participate in group activities to address issues of workplace concern, such as discussing salary, bonuses, benefits and work conditions, and publicize workplace disputes or issues, such as safety and discrimination or harassment, applies to all statutory employees—whether or not unionized. Although managers and most supervisors do not have Section 7 rights, the majority of workers have these rights.
Here are some of the highlights of the memorandum in Question & Answer format:
Question: Are all severance agreements barred and violative of Section 7 of the NLRA?
Answer: No. General Counsel Abruzzo takes issue with general releases and covenants not to sue that go beyond the employer and employment claims, as well as matters after the effective date of the agreement.
Question: Are all non-disparagement provisions proffered to statutory employees prohibited under Section 7 of the NLRA?
Answer: No. General Counsel Abruzzo says 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, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity, may be lawful. That’s incredibly limited and may result in some employers deleting their non-disparagement clauses.
Question: Do disclaimers save an overbroad provision in a severance agreement?
Answer: General Counsel Abruzzo noted that while disclaimers may be useful in resolving ambiguity, they would not necessarily cure an overbroad provision. Moreover, the disclaimer that employers typically draft may be insufficient since General Counsel Abruzzo seemingly wants employers to say that employees have the right to “organiz[e] a union to negotiate with their employer concerning their wages, hours, and other terms and conditions of employment” and “wear… union hats, buttons, t-shirts, and pins in the workplace…” among other enumerated Section 7 rights suggested in her model language.
Question: What confidentiality provisions satisfy the new standard?
Answer: Confidentiality clauses that are drafted narrowly to address the dissemination of proprietary information and trade secret information, for a period of time based on legitimate business justifications, are acceptable. Also, non-NLRB settlements that include prohibitions against disclosing only the financial terms of a settlement should continue to be deemed acceptable.
Question: Is the McLaren decision retroactive?
Answer: Yes. While unfair labor practice charges (ULPs) are subject to a 6-month statute of limitations, maintaining and/or enforcing previously entered overbroad agreements would be considered continuing violations and would restart the charge-filing period. The General Counsel advises that employers should consider dealing with previously executed overbroad clauses by contacting employees subject to them and advising that the provisions are null and void. Also that the employer will not seek to enforce those provisions or pursue any penalties, monetary or otherwise, for breaches of those unlawful provisions.
Question: Are other common severance agreement provisions at risk?
Answer: Yes. The General Counsel identified several other common severance provisions which may be problematic, including non-compete clauses, and non-solicitation clauses. The General Counsel also noted that cooperation provisions requiring the employee to cooperate with any current or future investigation or proceeding involving the employer are problematic. They affect an employee’s right to refrain under Section 7, such as if the employee was asked to testify against co-workers that the employee assisted with filing ULPs.
March 24, 2023
Stroock Client Alert
By: Howard S. Lavin, Elizabeth E. DiMichele
On March 22, 2023, Jennifer Abruzzo, the General Counsel of the National Labor Relations Board (NLRB or the Board), issued guidance addressing the NLRB’s decision in McLaren Macomb, 372 N.L.R.B. No. 58 (Feb. 21. 2023), which held that simply proffering severance agreements with overbroad non-disparagement and confidentiality language, in and of itself, is an independent violation of Section 7 of the National Labor Relations Act (NLRA or the Act). Please see our prior Stroock Client Alert for further details.
Section 7 Rights
Under Section 7 of the NLRA, employees within the meaning of Section 2(3) of the Act (statutory employees) have the right to join a union, bargain collectively through representatives of their own choosing, and engage in other protected concerted activities. The right to engage in protected concerted activities to discuss or participate in group activities to address issues of workplace concern, such as discussing salary, bonuses, benefits and work conditions, and publicize workplace disputes or issues, such as safety and discrimination or harassment, applies to all statutory employees—whether or not unionized. Although managers and most supervisors do not have Section 7 rights, the majority of workers have these rights.
Here are some of the highlights of the memorandum in Question & Answer format:
Question: Are all severance agreements barred and violative of Section 7 of the NLRA?
Answer: No. General Counsel Abruzzo takes issue with general releases and covenants not to sue that go beyond the employer and employment claims, as well as matters after the effective date of the agreement.
Question: Are all non-disparagement provisions proffered to statutory employees prohibited under Section 7 of the NLRA?
Answer: No. General Counsel Abruzzo says 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, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity, may be lawful. That’s incredibly limited and may result in some employers deleting their non-disparagement clauses.
Question: Do disclaimers save an overbroad provision in a severance agreement?
Answer: General Counsel Abruzzo noted that while disclaimers may be useful in resolving ambiguity, they would not necessarily cure an overbroad provision. Moreover, the disclaimer that employers typically draft may be insufficient since General Counsel Abruzzo seemingly wants employers to say that employees have the right to “organiz[e] a union to negotiate with their employer concerning their wages, hours, and other terms and conditions of employment” and “wear… union hats, buttons, t-shirts, and pins in the workplace…” among other enumerated Section 7 rights suggested in her model language.
Question: What confidentiality provisions satisfy the new standard?
Answer: Confidentiality clauses that are drafted narrowly to address the dissemination of proprietary information and trade secret information, for a period of time based on legitimate business justifications, are acceptable. Also, non-NLRB settlements that include prohibitions against disclosing only the financial terms of a settlement should continue to be deemed acceptable.
Question: Is the McLaren decision retroactive?
Answer: Yes. While unfair labor practice charges (ULPs) are subject to a 6-month statute of limitations, maintaining and/or enforcing previously entered overbroad agreements would be considered continuing violations and would restart the charge-filing period. The General Counsel advises that employers should consider dealing with previously executed overbroad clauses by contacting employees subject to them and advising that the provisions are null and void. Also that the employer will not seek to enforce those provisions or pursue any penalties, monetary or otherwise, for breaches of those unlawful provisions.
Question: Are other common severance agreement provisions at risk?
Answer: Yes. The General Counsel identified several other common severance provisions which may be problematic, including non-compete clauses, and non-solicitation clauses. The General Counsel also noted that cooperation provisions requiring the employee to cooperate with any current or future investigation or proceeding involving the employer are problematic. They affect an employee’s right to refrain under Section 7, such as if the employee was asked to testify against co-workers that the employee assisted with filing ULPs.
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