Confidentiality and Non-Disparagement Clauses Violate Section 7 Rights

On February 21, 2023, in McLaren Macomb, the National Labor Relations Board (NLRB or the Board) reversed its previous position taken in Baylor University Medical Center and IGT d/b/a International Game Technology, holding that conditioning severance agreements on the acceptance of non-disparagement and confidentiality terms is now unlawful, including the mere extension of such terms, reasoning that such provisions restrict workers’ rights under the National Labor Relations Act (NLRA). This decision reverses the previous position taken by the NLRB which broadly permitted employers to include confidentiality and non-disparagement provisions in severance agreements. In McLaren, however, the Board ruled that an offer of severance to non-supervisory employees[1] in exchange for confidentiality and non-disparagement terms that have the “reasonable tendency to restrain, coerce, or interfere” with Section 7 rights is a violation of Section 8(a)(1) of the NLRA. McLaren, which went into effect immediately and applies retroactively, carries significant implications for employers who regularly enter severance agreements with broad confidentiality and non-disparagement covenants. 

In response to this decision, on March 22, 2023, NLRB General Counsel (“GC”) Jennifer Abruzzo issued a non-binding memorandum (the Memo) providing employers with guidance regarding McLaren’s impact on severance agreements. First, not all severance agreements are banned under McLaren, only those in violation of an employee’s Section 7 rights. McLaren only impacts those agreements that contain overly broad provisions, such as confidentiality and non-disparagement provisions, that could affect an employee’s Section 7 rights. The Board’s position is that inclusion of such provisions in a severance agreement inherently coerces employees to waive their Section 7 rights. Second, the NLRB may extend the McLaren decision to severance agreements issued to supervisors under certain circumstances, such as where a supervisor had previously refused to violate the NLRA per the employer’s directives. Third, McLaren has retroactive effect, so that “maintaining and/or enforcing a previously entered severance agreement with unlawful provisions” will be considered a continuous violation and therefore not be time-barred. Additionally, the Board will attempt to sever overbroad, violative provisions of severance agreements in lieu of invalidating entire agreements. The NLRB will only seek to void those provisions it determines to be unlawful, instead of the entire agreement. The Board suggests that employers contact former employees subject to severance agreements containing such unlawful provisions and notify them that the provisions are null and void and will not be enforced; doing so could support the dismissal of a potential unfair labor practice charge arising from such provisions. Finally, narrowly tailored confidentiality and non-disparagement provisions may still be considered lawful. Additionally, narrowly tailored non-disparagement clauses limited to defamatory and maliciously untrue statements about the employer also remain valid. Employers, however, should keep in mind that confidentiality clauses that have the chilling effect of preventing employees from assisting others with workplace issues or from communicating with the NLRB, their union, or other third parties, are unlawful.

Key Takeaways from McLaren

Severance agreements on a whole will be scrutinized for violations of employees’ Section 7 rights. The Board is clearly more aggressive in seeking to protect employee rights. Employers must, therefore, review both their current and future severance agreements, as well as any agreements that could be deemed to infringe upon employees’ Section 7 rights.

Discussion of Racism is “Concerted Protected Activity.

In a February 27 memorandum, the NLRB concluded that a professor’s complaints regarding racism in the workplace and in the medical field constituted concerted protected activity under the NLRA. The Board issued this memorandum in response to an unfair labor practice charge brought by Aysha Khoury, a professor at the Kaiser Permanente Bernard J. Tyson School of Medicine in Pasadena, California. Khoury alleged she was suspended and later terminated from the school’s faculty after she engaged in discussions with both students and faculty members regarding racial representation and bias in the medical field. The Board found that the school’s actions against Khoury retaliated against her for engaging in concerted activity in violation of the NLRA. Specifically,

We conclude that the Employer violated Section 8(a)(l) because the Charging Party’s classroom discussion about issues of race faced by Black faculty and students, as well as systemic racism in medicine, was inherently concerted and was for mutual aid or protection. Further, the Charging Party’s tweets were protected concerted activity because they discussed terms and conditions of employment regarding racial disparities in medicine faced by medical professionals, sought the assistance of others to improve working conditions in medicine, and encouraged others to fight for racial equality and justice in the workplace. These tweets were also the logical outgrowth of the classroom discussion. The above protected concerted activity was a substantial and motivating factor that led the Employer to suspend and ultimately terminate the Charging Party.

Key Takeaways

Before taking adverse action against any employee, it is crucially important to consider whether the employee has engaged in any activity that could be protected under all employment laws, including the NLRA. Discussion of race and conversations of racism could constitute “concerted protected activity” under the NLRA, even the in absence of a “complaint” regarding a specific act of alleged racism by the employer. 

[1] The McLaren decision impacts severance agreements offered to both unionized and non-unionized employees who do not hold supervisory roles.

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