On Tuesday, February 21, 2023, the National Labor Relations Board (the “Board”) ruled that broad confidentiality and non-disparagement provisions contained in severance agreements are invalid. The ruling applies to private employers covered by the National Labor Relations Act (the “NLRA”). It is effective immediately. Therefore, employers who continue to use broad confidentiality and non-disparagement provisions are at risk of defending a claim that asserts an unfair labor practice.
In the ruling, McLaren Macomb (which can be found here: https://www.nlrb.gov/case/07-CA-263041), the Board reviewed terms that prevented an employee from disclosing terms of the severance agreement to any third party and from making other statements that may disparage the employer.
The Board held said provisions were invalid because, in part, they (i) restrict an employee’s ability to bring a claim under Section 7 of the NLRA; (ii) were not limited to the employee’s relationship with the employer nor in time; and (iii) “disparagement” was not defined as required by the Supreme Court of the United States.
The ruling may be appealed. In the meantime, employers must revise their severance agreements accordingly. This does not mean employers must delete all aspects of provisions regarding non-disparagement and confidentiality. The former must be narrowly tailored and defined in accordance with the law. The latter may still protect certain information such as trade secrets. Also, be sure to include a severability provision. It may save a severance agreement from being deemed invalid based on the recent ruling.
The information contained in this document does not constitute legal advice.