Employers: Proceed with Caution when Offering and Enforcing Severance Agreements
April 3, 2023
Courtesy of Warner Norcross + Judd
On February 21, 2023, the National Labor Relations Board (the “Board”) issued its decision in McLaren Macomb, 372 NLRB No. 58, holding that employers violate the National Labor Relations Act (the “Act”) when they offer employees severance agreements that contain broad non-disclosure and non-disparagement provisions. On March 22, 2023, the Board’s General Counsel Jennifer Abruzzo issued a memorandum providing additional guidance on the Board’s McLaren Macomb decision. According to Abruzzo:
- Although severance agreements are typically proffered to employees upon the termination of their employment, such former employees remain entitled to the same protections under the Act and may play an important role in providing information to the Board.
- Only the language of the severance agreement’s provisions determines their lawfulness. Circumstances surrounding the severance agreement do not matter when objectively analyzing whether its provisions are facially lawful. Additionally, an employee’s signature on a severance agreement is irrelevant because the mere proffer of an overly broad severance agreement may be coercive and unlawful under the Act.
- A “savings clause,” such as “Nothing in this provision is intended to prohibit the employee from engaging in any other activities protected by the National Labor Relations Act,” likely fails to narrow non-disclosure and non-disparagement provisions sufficiently to make them lawful under the Act. Instead, such provisions must address specific circumstances that justify the interference, restraint or coercion potentially imposed on an employee’s rights under the Act. For example, a narrowly-tailored and justified non-disparagement provision prohibiting defamatory statements about the employer may be lawful.
- It is likely that only an unlawful provision – rather than the entire severance agreement – will be voided, even without a severability provision.
- Although the Act generally does not protect supervisors, severance agreements that would prevent a supervisor from participating in Board proceedings, or retaliation against a supervisor for refusing to proffer an overly broad severance agreement, would be unlawful under the Act.
- The Board’s decision in McLaren Macomb is presumed to apply retroactively. Further, maintaining or enforcing a previously entered severance agreement with unlawful provisions would constitute a continuing violation beyond the typical six-month limitations period.
In light of McLaren Macomb and this additional guidance, employers should revisit their severance agreements to assess their non-disparagement and confidentiality-related provisions.