Time to Review Your Separation Agreement Form: The National Labor Relations Board Strikes Common Confidentiality and Non-Disparagement Provisions

03.22.2023

The National Labor Relations Board (NLRB) recently handed down a decision in McLaren Macomb, in which it held that common confidentiality and non-disparagement provisions in a separation agreement violated the National Labor Relations Act (NLRA). While most employers associate the NLRA with union activities, the act applies even in non-union contexts to protect concerted activity by employees. In McLaren, a hospital furloughed a number of employees during the COVID-19 pandemic. The hospital offered the employees severance payments in exchange for signing the hospital’s severance agreement. The severance agreement included a non-disparagement provision, which prohibited the employees from making statements that could disparage or harm the image of the hospital, and a confidentiality provision, which prohibited the employees from disclosing the terms of the agreement with any third persons.

In a reversal of existing board precedent, the NLRB ruled that both of these provisions were unlawful, as they would “reasonably tend to chill” statutorily protected activity under the NLRA. The NLRB characterized the non-disparagement provision as being so broad that it would prohibit the employee from making public statements about the employer, such as statements alleging that the employer had violated the NLRA. Further, the NLRB interpreted the provision as effectively prohibiting employees from assisting former co-workers with workplace issues, disclosing information to the NLRB, or making other remarks that would be detrimental to the employer. Regarding the confidentiality provision, the NLRB ruled that the terms would prevent the employee from disclosing even the existence of an unlawful provision contained in the agreement. As such, the Board held that both the non-disparagement and confidentiality provisions of the severance agreement had an impermissible chilling tendency on the rights of the employees to engage in discussion of workplace issues and other activity protected under the NLRA.

Notably, the non-disparagement and confidentiality provisions in the separation agreement at issue in the McLaren decision did not include any disclaimer or exclusion stating that the agreement was not intended to affect the employee’s rights under the NLRA. While not necessarily an antidote, an appropriately worded disclaimer may have helped stave off an NLRA violation. In light of the McLaren decision, employers should take a fresh look at their separation agreements and review them with employment law counsel to evaluate the need for revisions.