The NLRB Just Banned Non-Disparagement and Confidentiality Clauses in Severance Agreements - What It Means for Your Business

By Jonathan T. Hyman, Esq.

Severance agreements are complex legal documents. A business is voluntarily paying a terminated employee money to which the employee is not entitled in exchange for the certainty that it will never have to deal with that employee again. The document provides finality. That finality often includes promises by the employee not to defame or disparage the business and to keep the agreement and its terms confidential.

In McLaren Macomb, 372 NLRB No. 58 (Feb. 21, 2023), however, the National Labor Relations Board (NLRB) concluded that such non-disparagement and confidentiality provisions in severance agreements unlawfully violate employees’ rights to engage in protected concerted activity under the National Labor Relations Act (NLRA), as one could hypothetically read a broad non-disparagement or confidentiality clause to limit their right to talk about wages, hours, and other terms and conditions.

Now what? How should your business respond to this decision? Is it time to rip up your stock severance agreement if it contains these two common garden-variety provisions?

Here are our four biggest takeaways.

1. This case only applies to employees (whether union or non-union) covered by the National Labor Relations Act. In other words, it does not apply to anyone classified as a “supervisor.” For those higher-level employees, keep your severance agreements as-is; this case does not impact them at all.
2. This decision is prospective only. It does not impact severance agreements previously signed.
3. Consider using language disclaiming employees’ rights under the NLRA to save an otherwise unlawful non-disparagement or confidentiality provision in a severance agreement.
4. A portion of the consideration for which you are paying an ex-employee is the very non-disparagement and confidentiality that the NLRB has now banned. As a result, does this cause the amount of severance you are willing to provide to decrease?

From a practical standpoint, this decision makes very little sense. By the very nature of a severance agreement, you are giving a former employee something to which they are not entitled (additional money) in exchange for a signed agreement that contains certain covenants. The ex-employee is free to take the severance payment in exchange for the signed agreement (including the confidentiality and non-disparagement clauses) or not take the severance payment (and say whatever they want to whom). As these non-disparagement and confidentiality clauses are a condition of the receipt of a severance payment to which a non-employee is not otherwise entitled, the NLRA should not be implicated at all.

At least for now (and unless and until an appellate court says otherwise) McLaren Macomb is the law of the land. As such, your severance agreements must comply. WHP’s team of employment and labor attorneys is ready to assist your business to help ensure that your severance agreements meet this new legal standard.  

For more information, please contact one of WHP’s employment and labor attorneys:

Jonathan T. Hyman, Esq.		Amy L. DeLuca, Esq.		Matthew N. Danese, Esq.
440.695.8044 JHyman@WickensLaw.com		440.695.8062 ADeLuca@WickensLaw.com		440.695.8064 MDanese@WickensLaw.com

This article provides an overview and summary of the matters described therein. It is not intended to be and should not be construed as legal advice on the particular subject.