The NLRB’s General Counsel Jennifer Abruzzo has released a memo offering further guidance on the Board’s recent decision in McLaren Macomb. In our previous post addressing that decision, we highlighted several outstanding questions that the Board left unanswered, some of which were answered by the memo. However, the memo also sets forth GC Abruzzo’s interpretation of McLaren Macomb, including its potential far-reaching impact beyond severance agreements to a broad range of contexts. This post summarizes notable takeaways from memo.
- Non-Disparagement and Confidentiality Clauses Are Not Banned; Narrowly Tailored Ones are Still Considered Lawful.
The memo quickly confirms that the decision does not ban the use of confidentiality and non-disparagement provisions altogether. But the memo reminds employers that they must be narrowly tailored.
The memo offers as one example that confidentiality provisions may be lawful when narrowly tailored to restrict the dissemination of proprietary trade secret information for a period of time based on legitimate business justifications. However, confidentiality provisions that have a “chilling effect” precluding employees from assisting others and/or communicating with the NLRB, unions, legal forums, the media or other third parties are likely unlawful.
In the case of non-disparagement provisions, the memo further offers that provisions that prohibit statements that are “maliciously untrue,” such that they are made with knowledge of falsity or reckless disregard for the truth may be lawful. The memo, however, did not offer guidance beyond this note.
- A General Disclaimer or Savings Clause Will Likely Not Save Overbroad Confidentiality or Non-Disparagement Provisions.
The memo also confirms, as the NLRB has stated repeatedly in multiple contexts, that a general or broad disclaimer or “savings clause” would not save an otherwise overbroad confidentiality or non-disparagement provision. These clauses often seek to clarify in effect that nothing in the agreement is intended to restrain the employee’s section 7 rights. But they do not go far enough – any limitations clause would need to identify the specific type of Section 7-related conduct in which the employee is not precluded from engaging.
GC Abruzzo also noted that she had asked the National Labor Relations Board in the Stericyle case to “formulate a model prophylactic statement of rights,” as to work rules that employers could include in employee handbooks, but that it could just as easily apply in severance agreements. We will continue to track whether the Board takes GC Abruzzo up on this request.
- Unlawful Non-Disparagement and Confidentiality Provisions Will Likely Not Invalidate Other Provisions in a Severance Agreement.
One positive development in GC Abruzzo’s memo is the confirmation that unlawfully broad non-disparagement and/or confidentiality provisions will likely not invalidate the entire severance agreement. Instead, as many courts do, the Board and/or Regional Directors reviewing such agreements would seek to void only the unlawful provisions “regardless of whether there is a severability clause or not.” But GC Abruzzo also suggested that employer contact employees with overbroad provisions in place and alert them that they no longer applied. In doing so, the GC said, it could “form the basis for consideration of a merit dismissal if a meritorious charge solely alleging an unlawful proffer is filed.”
- McLaren Macomb Applies Retroactively.
In one of the more alarming pronouncements in the memo, GC Abruzzo confirmed the retroactive application of McLaren Macomb. Specifically, while offering an employee an overbroad severance agreement is subject to the NLRA’s six-month statute of limitations, the GC also stated that “maintaining and/or enforcing a previously-entered severance agreement with unlawful provisions that restrict the exercise of Section 7 rights continues to be a violation” to which the six-month statute of limitations would not apply. In effect, this means that Board’s General Counsel believes employers cannot enforce broad non-disparagement or confidentiality provisions restricting Section 7 rights regardless of how long ago the employee signed the severance agreement.
- Employers Could Face Liability Arising out of Providing Supervisors Overly Broad Agreements in Certain Circumstances.
While supervisors are generally not protected by the NLRA, GC Abruzzo’s memo clarified that the Act does protect supervisors from being retaliated against because of their refusal to act on the employer’s behalf in committing an unfair labor practice—that is, where an employer retaliates against a supervisor “who refuses to proffer an unlawfully overbroad severance agreement.” But the memo goes even further: GC Abruzzo explained that she believed a supervisor would be protected under the NLRA where their employer provides them with a severance agreement that prevents a supervisor “from participating in a Board proceeding.”
- The Train Does Not Stop with Confidentiality and Non-Disparagement Clauses in Severance Agreements.
One outstanding question in the wake of McLaren Macomb was whether its rationale applied to confidentiality and non-disparagement provision in other employment related policies, procedures and agreements, such as pre-employment offer letters, and/or to other types of provisions in severance agreement that could in theory interfere with Section 7 rights.
GC Abruzzo’s memo answers this in the affirmative, providing that “any employer communication to employees that tend to interfere with, restrain or coerce employees’ exercise of Section 7 rights would be unlawful if not narrowly tailored to address a special circumstance justifying the impingement on workers’ rights.” The memo does not elaborate on what constitutes a “special circumstance justifying the impingement on workers’ rights,” or how such circumstances may co-exist with other aspects of the guidance, most notably that neither employees, nor their unions can request broad confidentiality and/or non-disparagement provisions.
But GC Abruzzo went much, much further. In response to a question of whether “other provisions typically contained in severance-related agreements” are problematic, GC Abruzzo stated that she “believe[s] that some other provisions . . . might interfere with an employees’ exercise of Section 7 rights, such as: non-compete clauses; no solicitation clauses; no poaching clauses; broad liability releases and covenants not to sue that may go beyond the employer and/or may go beyond employment claims and matter as of the effective date of the agreement; cooperation requirements involving any current or future investigation or proceeding involving the employer as that affects and employee’s right to refrain under Section 7.”
An overarching takeaway from GC Abruzzo’s memo is that it most certainly foreshadows future action by either the Board or GC Abruzzo that will broaden the impact of McLaren Macomb beyond confidentiality and non-disparagement provisions in separation agreements.
GC Abruzzo’s opinion is notably not the law. But her views will certainly make their way into investigative and enforcement actions and seek to drive the outcomes of future Board decisions on these issues.
While GC Abruzzo’s long list of potentially problematic provisions is alarming, employers should therefore continue with their compliance efforts in light of McLaren Macomb and this latest guidance memorandum. Of note, we recommend that employers:
- Review their severance agreements (as recommended in our earlier post) to ensure that the non-disparagement and confidentiality provisions are narrowly tailored and, where relevant, include explicit carve outs for Section 7 rights.
- Determine whether any changes are needed in other agreements identified by the memo that could be problematic under McLaren Macomb (i.e., offer letters with confidentiality provisions and/or non-disparagement provisions, non-disclosure agreements, etc.).
- Evaluate and determine whether and when to utilize non-disparagement and/or confidentiality provisions. As we indicated in our earlier post, a one-size-fits-all approach may not always be the best approach. Thus, when including these provisions in agreements, employers should consider: (i) the type and reason for the separation; (ii) the type of worker and nature of their work; and (iii) the benefits being offered.
- Employers should also be mindful as to how they are identifying employees as “supervisors” in order to ensure they are including the requisite limitations language.
Employers should continue to pay close attention to further developments and consider how the Board may extend the holding in McLaren Macomb in other contexts (i.e., employee handbooks, arbitration agreements, other policies and/or agreements) (as recommended in our earlier post).
Mintz’s Employment Practice will continue to monitor this issue closely and stands ready to assist employers as needed.