Breaking Down the NLRB’s New Decision on Non-Disparagement and Confidentiality Provisions
On February 21, 2023, the National Labor Relations Board (NLRB) dropped a bombshell on employers—it is no longer legal to tie separation payments to an employee’s silence. This follows the Federal Trade Commission’s (FTC) proposed new rule announced in January, which would eliminate the use of non-competes nationwide. It’s a whole lot of big change at once…enough for two blogs, in fact, so this month we are going to focus just on the NLRB and next month we will hit non-competes.
So, what exactly happened with the NLRB? First, and in case you don’t know, the NLRB is the board charged with interpreting and enforcing the National Labor Relations Act (NLRA), which is supposed to protect all workers, not just union ones—a common misconception. In a case involving hospital workers in Michigan, the NLRB found that the separation agreements the hospital used with non-disparagement and confidentiality provisions violate the NLRA. The NLRB has taken a stand before on the language itself and enforceability of those clauses, but this decision reaches even further because the Board determined that just offering a separation document to an employee with such language violates the NLRA. Now, employers are left scratching their heads and scrambling to figure out if there is any way to either protect the confidentiality of the agreement or to stop employees who take separation payments from talking smack about the company after the fact.
Let’s start with the easiest stuff first. The NLRB’s decision in McLaren Macomb, 372 NLRB No. 58 (2023), applies only to employees, not supervisors or government workers. Section 2(11) of the NLRA defines “supervisor” as follows:
any individual having authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibly to direct them, or to adjust their grievances, or effectively to recommend such action, if in connection with the foregoing the exercise of such authority is not of a merely routine or clerical nature, but requires the use of independent judgment.
Now, of course there is caselaw which fleshes out this definition (and that we won’t discuss here) but provided someone is actually a supervisor—you may still offer agreements with confidentiality and non-disparagement provisions without violating the NLRA.
For employees, though, it will be super tricky. The workers in the McLaren Macomb case were furloughed and their severance agreements contained routine provisions used by almost every business in the country that would stop employees from making statements that could be considered disparaging or harmful, and from sharing information related to the terms of the separation agreements. The NLRB found that these clauses were a big no-no because they violated Section 7 of the NLRA, which protects employees’ rights to speak their minds and engage in “protected activity.” The way the NLRB sees it: employees have the absolute right to criticize and discuss their employer's policies and actions with their current and former coworkers, talk about their wages and severance pay, and cooperate in investigations by the NLRB without any interference from their employer.
The Board did leave open the possibility of using “carve out” language in a separation agreement. It also refused to protect an employee’s “extreme statements” that are contrary to the core interests of an employer—but what that means exactly is anyone’s guess right now.
First, if you intend on using separation agreements, talk to counsel before you use a form from last month, let alone last year. They need to be reviewed carefully. Second, for employees who are not supervisors, consider using “narrowly tailored” confidentiality and non-disparagement provisions—but only for extreme statements—together with a disclaimer protecting NLRA Section 7 rights. I recommend mimicking the language (however scant) used by the NLRB.
Finally, this NLRB decision likely has implications for restrictive covenant agreements as well because they routinely contain non-disparagement provisions and often “survive” a separation. You are going to have to look at those anyway because of the FTC’s work around non-competes. More on that next month.