04 April 2023

Key Takeaways from NLRB’s General Counsel Guidance Memo on Severance Agreements

On February 21, 2023, the National Labor Relations Board issued its decision in McLaren Macomb, 372 NLRB No. 58, and seemingly upended the modern severance agreement. As we have previously written about (see our Client Alert here) the Board held that employers violate the National Labor Relations Act when they offer overly broad severance agreements that may interfere with, restrain, or coerce employees in the exercise of their statutory rights.

In McLaren Macomb, the Board held that two provisions in the severance agreement at issue, the confidentiality and non-disclosure provisions, restricted employees’ statutory rights. The Board found that the provisions were too broad. Therefore, the provisions had a reasonable tendency to interfere with employees’ rights to engage in activities like making public statements about their workplace or discussing employment matters with former co-workers.

Since the Board released its decision, clients and lawyers have wondered—what does McLaren Macomb actually mean?  General Counsel Jennifer Abruzzo recently released her interpretation of the decision in GC Memo 23-05. To be clear, this is not a court decision and is in no way binding precedent.

Here are some key takeaways as you consider your current severance form:

  1. The General Counsel will generally seek to have overly broad provisions voided out of severance agreements—as opposed to finding the entire agreement void. (We still recommend a severability clause!)
  2. On whether confidentiality provisions could ever be found lawful, GC Abruzzo said that those that only limit the disclosure of financial terms comply with the McLaren On whether non-disparagement provisions could ever be found lawful, GC Abruzzo said that those limited to defamatory statements about the employer would be lawful.
  3. Just offering a severance agreement with a clause that is unlawfully overbroad is an unfair labor practice – whether or not the employee actually signed the severance agreement is irrelevant.
  4. It could be considered an unfair labor practice for an employer to discipline or fire a supervisor who refuses to proffer an unlawfully overbroad severance agreement to an employee.
  5. Even though supervisors are excluded from the protection of federal labor law, it could still be unlawful to proffer a severance agreement to a supervisor that would prohibit the supervisor from participating in a Board proceeding.
  6. Savings clause or disclaimer language – i.e. language that the agreement is not intended to limit any of the employee’s legal rights – may be able to save an overbroad non-disparagement or confidentiality provision. But to satisfy GC Abruzzo’s interpretation, it would be quite a lengthy statement to include in a severance agreement.  And there’s no guarantee it works, as GC Abruzzo asserted that the employer may still be liable for any mixed or inconsistent messages provided to employees that could impede the exercise of protected rights under federal labor law.
  7. Other provisions that GC Abruzzo thinks could be “problematic”: 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 matters as of the effective date of the agreement; cooperation requirements involving any current or future investigation or proceeding involving the employer as that affects an employee’s right to refrain under Section 7 of the National Labor Relations Act, such as if the employee was asked to testify against co-workers that the employee assisted with filing a ULP charge.

Contact the author Bridget McConville.