Gavel to Gavel: NLRB Strikes Blow to Confidentiality Provisions in Severance Agreements

The National Labor Relations Board recently issued a precedent-shifting decision, ruling that a number of common severance agreement provisions violate the National Labor Relations Act simply by being included in a severance agreement offered to a non-management employee.

In McLaren Macomb, the NLRB determined that standard confidentiality, non-disparagement and non-participation provisions – typical in most severance agreements – interfere with the ability of non-management employees to exercise their Section 7 rights and are unlawful under the NLRA.

The case revolved around a reduction in force conducted by McLaren Macomb hospital in Michigan. The hospital laid off 11 employees and offered each a severance package. All 11 signed the agreements and accepted the severance benefits. Each of the agreements contained the standard severance agreement provisions, including confidentiality, non-disparagement and non-participation clauses. Following the employees’ acceptance of the severance benefits, their union filed unfair labor practice charges, alleging, among other things, that the severance agreement provisions were unlawful.

In agreeing with the union, the NLRB held that these provisions interfered with the ability of current and former employees to communicate regarding the terms and conditions of employment and to work together to alter those terms and conditions. Moreover, the board ruled that these provisions also interfered with workers’ rights to communicate using administrative, judicial, legislative and political forums, the media, social media and communications to the public.

What does this mean for employers? First, it means that, if challenged, such clauses in prior severance agreements are likely not enforceable under this NLRB ruling. Second, employers have three options to consider for severance packages with non-management employees going forward:

  • Employers can retain their current confidentiality, non-disparagement and non-participation clauses as is, with the knowledge that their ability to enforce the provisions has been hampered by the NLRB.
  • Employers can revisit their current confidentiality, non-disparagement and non-participation clauses, tailoring them to meet the standards set forth by the NLRB.
  • Employers can choose to remove these provisions from the severance agreements, ensuring that the NLRB’s decision will not have any impact upon the enforceability of such agreements.

This article first appeared in The Journal Record on May 31, 2023, and is reproduced with permission from the publisher.


Associated People:

Michael W. Bowling

Practice Area:

Labor & Employment