First Comes McLaren, Then Comes Memo 23-05
Carissa Davis & Patrick Scully
By now, many employers are aware of the National Labor Relations Board’s (“NLRB”) February 2023 decision McLaren Macomb in which the NLRB reversed the existing standard that an employer’s inclusion of confidentiality, nondisclosure, and non-disparagement provisions in severance agreements generally does not violate the National Labor Relations Act (“Act”). In McLaren, the NLRB went even further, holding the “mere proffer” of a severance agreement that conditioned receipt of benefits on “forfeiture of statutory rights” violates the Act. The alleged “forfeiture of statutory rights” in McLaren came in the form of (1) a confidentiality provision requiring employees to keep the severance agreement confidential; (2) a non-disclosure agreement prohibiting the employees from disclosing confidential, privileged, or proprietary information; and (3) non-disparagement language prohibiting employees from making statements to other employees or third parties that could disparage or harm the image of the employer (and certain representatives of the employer). Look familiar? Not surprising; these provisions are standard practice in a variety of agreements, including but not limited to severance, settlement, waiver and release, and restrictive covenant agreements.
This week, the NLRB’s General Counsel Jennifer Abruzzo issued Memorandum GC 23-05 (“Memo”) as “guidance” to understand McLaren. However, the Memo reads more like an NLRB decision than a clarification of law, and Abruzzo’s proffered interpretation reaches far beyond the McLaren holding.
While Abruzzo states that not all confidentiality and non-disparagement provisions are banned, she proceeds to explain a variety of circumstances and hypotheticals that allegedly give rise to an 8(a)(1) violation, leaving the reader to question what remains. Here are some of the high-level points.
- The McLaren holding applies retroactively.
- The McLaren principles apply to current and former employees (and apparently some supervisors too).
- A current or former employee need not have actually signed an “unlawful” agreement; prior proffering of the same would constitute a violation.
- It does not matter whether the employee was represented by a union.
- It does not matter whether the employee requested the inclusion of the provision.
- While some non-disparagement clauses are allegedly permitted, the standard articulated resembles defamation.
- McLaren is not limited to confidentiality and non-disparagement provisions in severance agreements but could apply to non-compete clauses, non-solicitation clauses, no-poaching clauses, broad waivers and releases, covenants not to sue, and no-cooperation clauses.
- McLaren could apply to other “employer communications,” which could arguably include offer letters, policies, handbooks, and other announcements.
Abruzzo explains that if employers believe they have proffered or executed agreements that could run afoul of the McLaren standard, they should contact former and current employees and notify them that those provisions are void and they will not seek to enforce them. Although “it may not cure a technical violation” of the law, perhaps an NLRB Administrative Law Judge would choose to dismiss a meritorious charge based on an unlawfully proffered agreement if the employer informed employees that the provisions are void. This is cold comfort for employers reeling from McLaren.
Abruzzo made clear that she believes standard disclaimers providing “nothing in this agreement shall be construed so as to prohibit the exercise of Section 7 rights” are not sufficient. She took the opportunity to extol her brief in Stericycle, in which she set forth eight comprehensive disclaimers that should be included in all agreements.
So, what is permitted? Abruzzo explains, “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.” This represents only a fraction of the legitimate interests employers might seek to protect.
Employers must be mindful that the Memo is not the law. However, it provides valuable insight into the direction that the NLRB (and the Regions) may be headed. Experienced labor counsel can assist in mitigating exposure under the Act while safeguarding employer interests in confidentiality and maintenance of the same.