General Counsel Issues Guidance Clarifying the National Labor Relations Board’s McLaren Macomb Decision

Ashley Graves, Law Clerk

             The General Counsel of the National Labor Relations Board (“NLRB”) has issued a memorandum clarifying the National Labor Relations Board’s (“NLRB” or the “Board”) McLaren Macomb decision—previously discussed in this blog.  While the memorandum does not have the same precedential effect as an NLRB decision, it is instructive in anticipating how the Board will respond to unfair labor practice charges concerning the terms of severance agreements.

 Background

            In rendering its decision in McLaren Macomb on February 21, 2023,[1] the NLRB reversed recent precedent governing the validity of confidentiality and non-disparagement clauses in severance agreements, and returned to its pre-2020 standard that these clauses are illegal if they have a reasonable tendency to interfere with, restrain, or coerce employees in exercising their rights under Section 7 of the National Labor Relations Act (“NLRA” or “Act”).[2]  On March 22, 2023, the NLRB’s General Counsel issued a Memorandum to Regional Directors which addresses some of the questions the McLaren Macomb decision left unanswered.[3]

Issues Discussed in the General Counsel’s Memorandum

            Of particular interest to employers, some of the pertinent issues discussed by the General Counsel in its guidance include the following:

·        Severance agreements as a whole are not banned, and they may still be used by employers if they do not contain overly broad provisions affecting or infringing employees’ Section 7 rights.

·        The McLaren Macomb decision applies retroactively, subject to relevant statutes of limitations.  This means that a settlement agreement entered into prior to the McLaren Macomb decision, and which may have been acceptable under Board precedent prior to McLaren Macomb (but is no longer acceptable now), may result in an NLRB charge and resulting liability under the Act if the employer continues to maintain or enforce the agreement as previously written.

·        Ordinarily, if a severance agreement contains an unlawful, overly-broad provision under McLaren Macomb, the Board will endeavor to have the specific unlawful provisions voided out of the agreement, rather than declare the entire agreement void—even if the agreement does not have a severability provision.

·        The Board’s Operations-Management Memorandum 07-27,[4] which addresses acceptable terms in private settlement agreements, is still in full force and effect.

·        Pre-employment communications with employees or offer letters may be unlawful if they contain overly broad provisions that tend to interfere with, restrain, or coerce employees’ exercise of Section 7 rights, and McLaren Macomb does not change this principle.

·        Not all confidentiality provisions in severance agreements are unlawful.  For example, confidentiality clauses that are narrowly tailored to restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications may be considered lawful.

·        Not all non-disparagement provisions are unlawful.  A narrowly tailored, justifiable non-disparagement provision that is limited to employee statements about the employer that meet the definition of defamation (i.e. maliciously untrue statements made with knowledge of their falsity or with reckless disregard of the truth or falsity) may be used.

·        Savings clauses and/or disclaimers discussing Section 7 rights may not necessarily cure overly broad provisions in severance agreements.

·        Other provisions typically contained in severance-related agreements may be problematic as well.  Specifically, non-compete clauses; non-solicitation clauses; no poaching clauses; and some broad liability releases and covenants not to sue all have the potential to interfere with employees’ exercise of Section 7 rights.

Recommendations

            To limit potential challenges to severance agreements moving forward, employers should consider whether any of the provisions may unduly affect any employee rights granted under Section 7 of the NLRA.  Because McLaren Macomb may be applied retroactively, to the extent employers are aware of prior severance agreements with provisions that are likely unlawful under McLaren Macomb or other Board precedent, employers should endeavor to contact the affected employees and notify them that the overbroad provisions in the severance agreements no longer apply.  As always, Campbell Litigation is available to help employers navigate these and other employment-related issues, and the firm will continue to monitor and report any additional updates regarding the McLaren Macomb decision.

[1] McLaren Macomb, 372 NLRB No. 58 (2023).

[2] https://www.rockymountainemployersblog.com/blog/2023/3/2/the-national-labor-relations-board-returns-to-pre-2020-precedent-governing-the-legality-of-severance-agreement-language.

[3] The memo is available at https://www.nlrb.gov/news-outreach/news-story/nlrb-general-counsel-issues-memo-with-guidance-to-regions-on-severance.

[4]OM 07-27 is available at https://www.nlrb.gov/guidance/memos-research/operations-management-memos.