Member Article

On February 21, 2023, the National Labor Relations Board (“NLRB”) overruled two Trump-era decisions, restoring earlier precedent concerning the legality of confidentiality and non-disparagement provisions in severance agreements.  In McLaren Macomb,[1] the Board overruled its decisions in Baylor University Medical Center[2] and IGT d/b/a International Game Technology,[3] holding that an employer violates Section 8(a)(1) of the National Labor Relations Act (“Act”) when it offers a severance agreement containing provisions that would restrict employees’ exercise of their rights under the Act.  Such agreements, according to the Board majority, have a reasonable tendency to restrain, coerce, or interfere with employees’ rights under the Act. 

Trump-Era Test for Non-Disparagement and Confidentiality Requirements

In examining severance agreements prior to its decision in Baylor, the Board focused on the language of an agreement to determine whether it had a reasonable tendency to interfere with, restrain, or coerce employees’ exercise of their rights under the Act.  E.g., Shamrock Foods Co., 366 NLRB No. 117 (2018).  In Baylor, the Board shifted its focus from the language of the severance agreement to the circumstances under which it was presented to employees, holding that the “mere proffer” of a severance agreement containing a broad confidentiality provision was permissible under the Act. 

A few months later, in IGT, the Board dismissed an allegation that the employer maintained an unlawful non-disparagement provision in the severance agreement it offered to separating employees.  The provision required the signer not to “disparage or discredit IGT or any of its affiliates, officers, directors and employees.”  Relying on Baylor, the Board reasoned that the agreement was voluntary, did not affect pay or benefits that were established as terms of employment, and was not proffered coercively.  Consequently, the agreement was lawful under the Act.

What Employers Need to Know

In overruling Baylor and IGT, the Board in McLaren revived the principle that a severance agreement is unlawful if its terms have a reasonable tendency to interfere with, restrain, or coerce employees in the exercise of their rights under the Act, and that employers violate the Act when they offer such agreements.  The Board emphasized that the language of the severance agreement—not the employer’s motive—is key to determining the existence of a violation, and concluded that the non-disparagement and confidentiality restrictions in issue facially interfered with employees’ rights under the Act.

Under the new test, a severance agreement is unlawful if it precludes an employee from assisting coworkers with workplace issues concerning their employer, and from communicating with others, including a union and the Board, about their employment.  Going forward, employers will want to ensure that confidentiality and non-disparagement clauses in their severance agreements are narrowly tailored to respect the range of rights afforded to employees under the Act.

If you are an employer with questions about how your business may be affected by this new decision, contact your Dinsmore Labor and Employment attorney to discuss.

[1] 372 NLRB No. 58 (2023)

[2] 369 NLRB No. 43 (2020)

[3] 370 NLRB No. 50 (2020)