New Limits on Nondisparagement and Confidentiality Clauses in Agreements with Employees

Last week, the National Labor Relations Board (NLRB) decided that it is illegal for employers to offer employees severance agreements that broadly prohibit the employees from making statements that could disparage or harm the image of the employer and/or that prohibit employees from disclosing the terms of the agreement. The NLRB’s reasoning is that offering an agreement to employees that contains such prohibitions chills them from acting in concert to engage in protected activities. Examples of protected activities include, for example, sharing information to help each other, signing petitions, and seeking to improve pay and working conditions, with or without a union. Below are some key takeaways from the NLRB’s McLaren Macomb decision:

1. The decision only applies to employees who are covered by the National Labor Relations Act (NLRA), which includes most private-sector employees who meet certain dollar thresholds that vary by industry. For details, see https://www.nlrb.gov/about-nlrb/rights-we-protect/the-law/jurisdictional-standards
2. The NLRA does not cover government employees, agricultural and domestic workers, independent contractors, workers employed by a parent or spouse, supervisors (with limited exceptions) or managers, so this decision does not affect any agreements offered to any of them. For details on NLRA coverage, see https://www.nlrb.gov/about-nlrb/rights-we-protect/the-law/employees/are-you-covered
3. Any nondisparagement or confidentiality clauses in new agreements that are offered to employees covered by the NLRA should be narrowly tailored so as to not limit employees’ protected activities, which may require revising standard templates.
4. The NLRA violation occurs when the agreement is offered to the employee (even if the employee does not accept it), so a blue-pencil clause in the agreement will not be sufficient to avoid an unfair labor practice charge if the language is overbroad.
5. The impact of the McLaren Macomb decision on existing agreements is unclear. The fact that an agreement was valid based on the NLRB’s interpretation of the law when the agreement was offered is potentially a defense, and the NLRB’s rules place a six-month time limit on filing charges, so a complaint based on an agreement that was signed more than six months ago is likely to be dismissed. However, the NLRB would likely consider any attempts to enforce an overbroad agreement after the date of the decision (February 21, 2023) to be an unfair labor practice.
6. The McLaren Macomb decision involved severance agreements, but it is likely that the NLRB will apply the decision’s rationale to any agreement that requires employees to give up their rights to engage in protected activities in exchange for a benefit provided by the employer. Any existing employment agreements that contain nondisparagement or confidentiality clauses should be reviewed for compliance with the decision.

The above is a not legal advice, and should not be relied on. It is a broad overview of a complex area of the law, and how it applies to any specific employer may vary depending on the circumstances. If you have any questions, or if you need assistance reviewing or revising your agreements, feel free to contact Karen Sutherland at ksutherland@omwlaw.com, Erin McCool at emccool@omwlaw.comm, or Jennifer Berry at jberry@omwlaw.com to see if they can assist you.