Employment Law Report
Additional Information Regarding Recent NLRB Guidance on Severance Agreements
By: Tyson C. Gorman with assistance from Mick Smith, Wyatt Summer Associate
A recent article written by R. Joseph Stennis, Jr. and Marianna J. Michael on this blog highlighted several important aspects of a recent National Labor Relations Board (“NLRB” or “Board”) decision and a subsequent memo issued by the Board’s General Counsel regarding the Board’s decision in McLaren Macomb, 372 NLRB No. 58, in which the Board outlined new restrictions on severance agreements, specifically in reference to non-disparagement and confidentiality provisions. The following is a summary of several main points intended to provide further detail on the article and highlight recent developments and interpretations of the Board’s decision since its March publication.
- The Board’s decision extends to all communications between employer and employee. While the Board’s decision specifically referenced severance agreements, the General Counsel’s memo states that overly broad provisions in any employer communication to employees, including pre-employment or offer letters, may be declared unlawful if not “narrowly tailored to address a special circumstance in justifying the provision.”
- The Board’s decision essentially turns non-disparagement provisions into “non-defamation” provisions. Non-disparagement provisions will be declared unlawful unless they are limited to employee statements about the employer that meet the standard for defamation.
- The decision could extend to supervisors and managers in a narrow range of circumstances. Although supervisors and managers are generally not protected by the National Labor Relations Act (“the Act”), the General Counsel’s memo stated that the decision in McLaren will apply to a supervisor or manager if the supervisor or manager is retaliated against for refusing to proffer an unlawful severance agreement to an employee.
- A recent 5th Circuit decision found a Tesla confidentiality provision to be unlawful. On March 31, the United States Court of Appeals for the 5th Circuit affirmed a decision by the NLRB that found a confidentiality provision drafted by Tesla, which broadly forbade employees from communicating with the media regarding company matters, was in violation of the Act. See Tesla, Inc. v. NLRB, 63 F.4th 981 (5th Cir. 2023). In 2016, the automotive company required employees to sign a confidentiality agreement stating that it is “never OK to communicate with the media or someone closely related to the media about Tesla, unless [the employee has] been specifically authorized in writing to do so.”
- Confidentiality provisions are lawful only in limited circumstances. Confidentiality agreements will be declared unlawful if they restrict employees from discussing workplace issues to a third party or communicating with the Board. However, employers may still act to protect proprietary or trade secret information “for a period of time based on legitimate business considerations.”
Given the Board’s decision in McLaren is relatively recent, it remains to be seen how courts will react to the various issues addressed in the decision and the General Counsel’s subsequent memo. Employers and their counsel should carefully craft confidentiality and non-disparagement provisions with McLaren in mind until further notice.
