The National Labor Relations Board (NLRB) has issued a new ruling reversing prior precedent on an employer’s use of severance agreements. In McLaren Macomb¹ the employer offered severance agreements to unionized employees permanently furloughed at the beginning of the pandemic. The agreement contained broad non-disparagement and confidentiality provisions².

In overturning prior decisions on the issue³, the NLRB now finds a severance agreement containing such provisions to be unlawful if it has a reasonable tendency to “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed” in Section 7 of the National Labor Relations Act (NLRA). Section 7 protects an employee’s rights – any employee union or non-union – “to engage in concerted activity for the purpose of collective bargaining or other mutual aid or protection.” In McLaren, the NLRB found that the provisions in the employer’s severance agreement not only limited discussions with coworkers, but other communications with a wide range of third parties thereby impacting the employee’s Section 7 rights.

The Board decision did not address whether a comprehensive disclaimer (e.g., “these provisions do not prevent you from enforcing your Section 7 rights,” etc.) might insulate an employer from liability (since the covenants at issue were broadly drafted and did not contain disclaimer language). It may be possible that a well-drafted and broad disclaimer in a severance agreement might allow an employer to include non-disparagement and confidentiality provisions. Employers utilizing severance agreements with non-disparagement or confidentiality provisions should consult with legal counsel to review existing agreements for NLRA compliance.

1. NLRB No. 58 (Feb. 21, 2023).
2. Lawful under prior NLRB precedence.
3. Baylor University Medical Center, 369 NLRB No. 43 (2020); IGT d/b/a Inter-national Game Technology, 370 NLRB No. 50 (2020).