NLRB Restricts Certain Severance Agreement Provisions

A recent decision by the National Labor Relations Board (NLRB) has reversed previous Trump-era decisions upholding the legality of confidentiality and non-disparagement provisions in severance agreements. In McLaren Macomb, the NLRB examined whether the employer violated Section 7 of the National Labor Relations Act (NLRA) by offering severance agreements to employees that contained standard confidentiality and non-disparagement language. The provisions at issue prohibited the employees from making statements that could disparage or harm the employer’s image and also prohibited them from disclosing the terms of their severance agreements.

The Board's decision stopped short of outlawing confidentiality and non-disparagement provisions in severance agreements altogether. Rather, the decision indicates that such provisions may be included in severance agreements as long as they are narrowly tailored. The NLRB did not provide an explanation as to how employers may narrowly tailor such provisions, but it is notable that neither provision at issue in McLaren Macomb was accompanied by a disclaimer such as “these provisions are not intended to restrict Employee's Section 7 rights" or similar language.

Employers should also be aware that a violation of the NLRA will be found under the McLaren Macomb decision where an employer merely proffers an unlawfully broad severance agreement to an employee. Moving forward, employers should consider reviewing their severance agreements to ensure they do not include overly broad language that the Board could view as restricting employees' Section 7 rights. Click here to read more on this decision, courtesy of Baker Donelson.