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NLRB and Confidentiality and Non-Disparagement

March, 2023

NLRB BANS NON-DISPARAGEMENT & CONFIDENTIALITY COVENANTS

IN SEVERANCE AGREEMENTS

In a decision released February 21, 2023, the National Labor Relations Board, (NLRB),  reversed Trump-era rule on severance agreements.  McLaren Macomb and Local 40 RN Staff Council, Office and Professonal Employees, International Union, AFL-CIO, Case 07-CA-263041.

First, some important caveats.  The NLRB is the federal agency enforcing the National Labor Relations Act.  The Act covers both union and non-union private sector employees in the protection of protected, concerted activity.  It does not cover managerial and supervisory employees, independent contractors, public sector employees, agricultural laborers, domestic service workers of any family or person at home, individuals employed by a parent or spouse and individuals employed by an employer subject to the Railway Labor Act.

In the McLaren decision, the NLRB concluded that broad confidentiality and non-disparagement provisions like the ones presented were unlawful because they tend to “chill” employees’ and former employees exercise of their rights under Section 7 of the Act.  These rights include engaging in concerted activity and discussion about the workplace and discussion concerning terms and conditions of employment.

The NLRB held that the broad nature of a non-disparagement provision, like the one presented, would unlawfully prohibit employees from publicly criticizing employer policies and raising complaints about the employer with coworkers, their union, government agencies, the media or the general public.

The decision does not affect confidentiality provisions pertaining to trade secrets, intellectual property, proprietary information, financial information and other commonly considered “confidential” business information.  The provision in this decision pertained exclusively to the confidentiality of the existence and terms of the severance agreement offered.

It should be noted that the Act does not protect and employee’s disloyalty or public criticism that is maliciously motivated or maliciously untrue (made with knowledge of its falsity or with reckless disregard for its truth or falsity).

The NLRB held that an employer’s act of offering the severance agreement containing such illegal broad confidentiality and non-disparagement provisions, even if it does not intend to enforce them, is still unlawful.