NLRB Issues Critical New Rules for Severance Agreements


By:  Emma Johnston

On February 21, 2023, the National Labor Relations Board (“NLRB”) issued critical new rules for severance agreements via its opinion in McLaren Macomb, 07-CA-263041.  While the decision will likely be appealed (and the rules therefore might change again), here’s what you need to know in the meantime: 

What new rules did the NLRB announce? The NLRB determined that employers can no longer condition an employee’s receipt of severance benefits on the employee’s acceptance of broadly written non-disparagement provisions and/or confidentiality provisions because doing so violates employees’ Section 7 rights under the National Labor Relations Act.

What was the NLRB’s reasoning?  Regarding non-disparagement provisions, the NLRB said, “Public statements by employees about the workplace are central to the exercise of employee rights under the Act.”  Based on that principle, the NLRB concluded that far-reaching restrictions on an employee’s right to speak about their employment —for example, restrictions that fail to define disparagement in accordance with the NLRB’s well-established definition or that fail to include a temporal limit—are impermissible.

Regarding confidentiality provisions, the NLRB said that broadly written restrictions on an employee’s right to disclose the terms of their severance agreements or the terms and conditions of their jobs more broadly are unlawful because “preclude an employee from assisting coworkers with workplace issues concerning their employer, and from communicating with others, including a union, and the Board, about his employment.”  Such a preclusion violates employee’s under the Act.

Who do the new rules apply to?  The new rules apply to all employers who are subject to the NLRB’s authority.  That includes most US private sector employers but not local government agencies (federal, state, and local), airlines, or railways.

Some categories of workers are not likely covered by the ban, because they are excluded under the National Labor Relations Act, which the NLRB enforces. These categories inlcude supervisors and managers with the authority to hire, fire, set pay and discipline workers, even if their company itself is subject to NLRB authority; independent contractors; agricultural and domestic workers; and anyone employed by a parent or spouse.

Do the new rules apply to old severance agreements?  That has not been definitively decided.  however, NLRB decisions are typically presumed retroactive unless it would be unfair to the employer or result in injustice.  That may be the case here because employers have been offering severance agreements in recent years based on a 2020 NLRB decision that was effectively overturned by the board’s latest ruling.

What can employers still condition severance benefits on?  Employers may still require employees to not reveal trade secrets or other confidential information that protects their business interests.  They can also still ask employees to waive their right to make any future claims or file a lawsuit against them.

It is also possible that some very narrowly written non-disparagement or confidentiality clauses could be enforceable, but it is unclear at this time what such permissible clauses might look like.