Overbroad Nondisclosure, Confidentiality, and Nondisparagement
Agreements Violate the National Labor Relations Act
A new case recently decided by the National Labor Relations Board held that “an employer violates Section 8(a)(1) of the [National Labor Relations] Act when it proffers a severance agreement with provisions that would restrict employees’ exercise of their NLRA rights.” McLaren Macomb, 372 NLRB No. 58, slip op. at 7 (2023). “Such an agreement,” reasoned the NLRB, tends “to restrain, coerce, or interfere with the exercise of Section 7 rights by employees…” Id.
This decision covers almost all private sector employers, not just unionized workplaces. However, the decision applies only to agreements between employers and current or former nonsupervisory employees (managers, independent contractors, or those who qualify as a supervisor under the National Labor Relations Act (“NLRA”) are not implicated).
The following severance agreement language was at issue in the McLaren Macomb case:
Confidentiality Agreement. “The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than [a] spouse, or as necessary to professional advisors.”
Nondisclosure. “At all times hereafter, the Employee promises and agrees not to disclose information, knowledge, or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents[,] and representatives.”
The NLRB found this language overly broad and determined that it would have a chilling effect on an employee’s Section 7 rights under the NLRA.
Nondisparagement. The NLRB also addressed the severance agreement’s nondisparagement clause. Under prior NLRB case law, employees have a right to criticize an employer’s policy so long as the communication is not “so disloyal, reckless, or maliciously untrue as to lose the Act’s protection.” Emarco, Inc., 284 NLRB 832, 833 (1987).
The NLRB took issue with the nondisparagement provision’s breadth and the fact that it did not define disparagement or meaningfully limit whom the employees were prohibited from discussing. The provision protected not only the employer but also “its parents and affiliated entities and their officers, directors, employees, agents, and representatives”. The provision also had no expiration. The NLRB determined that this nondisparagement provision prevented employees from saying virtually anything regarding anyone connected to the employer for all time. As such, the NLRB found that this provision, as drafted, was impermissible.
The NLRB’s decision is also notable because it holds that an employer violates the NLRA when it offers an employee a severance agreement with offending provisions like those described above. It does not matter whether the employee accepts the agreement; simply offering an agreement with illegal provisions violates the law.
Although this decision may be appealed, for the present, employers should review any severance agreements, offer letters, proprietary information and invention assignment agreements, and other employment agreements to ensure the nondisparagement, nondisclosure, and confidentiality provisions are narrowly drafted and comply with the NLRB’s McLaren Macomb decision.