Revising Employee Agreements: Narrow Confidentiality and Non-Disparagement Provisions Now
In McLaren Macomb, 372 NLRB No. 58, the National Labor Relations Board (the “Board”), considered whether the confidentiality and non-disparagement provisions in severance agreements offered to a group of employees violated the National Labor Relations Act (the “Act”). The Act is intended to protect an employee’s right to discuss the terms and conditions of employment with coworkers and others. The issue in McLaren Macomb was whether the confidentiality and non-disparagement provisions had a chilling effect on this fundamental right of employees under the Act.
The Board found that the provisions did have such an effect and therefore violated the Act based on the mere proffer of the severance agreement to the employee and it was immaterial whether the separating employee accepted the severance agreement or not. The Board further concluded it was not necessary to show the employer engaged in any other unlawful or coercive conduct since the violation occurred with the mere proffer of the severance agreement.
Importantly, the actual language of the confidentiality and non-disparagement provisions at issue in McLaren Macomb are virtually identical to the language of such provisions found in many existing employment agreements. Based on this decision and the subsequent guidance issued by the Board, employers should revisit their use of broad confidentiality and non-disparagement provisions in their employment agreements.
The guidance issued by the Board on March 22, 2023 (Memorandum GC 23-05) contains multiple statements that are of importance to employers. Those include the following:
- The decision is not a “ban” on severance agreements, and such agreements “may continue to be proffered, maintained, and enforced” so long as those agreement do not “affect the rights of employees to engage with one another to improve their lot as employees.”
- The decision also does not ban confidentiality clauses, and such clauses are still lawful so long as the clauses are narrowly tailored to restrict dissemination of “proprietary or trade secret information for a period of time based on legitimate business justifications.”
- The prohibition against broad confidentiality or non-disparagement provisions applies even if it is the employee requesting the broad provisions.
- The prohibition against broad confidentiality or non-disparagement provisions is not limited to such clauses in severance agreements, but it could apply to such clauses in other employer communications with employees including offer letters, employment agreements, handbooks, etc.
- Confidentiality provisions stand to violate the Act if the provisions “preclude employees from assisting others about workplace issues and/or from communicating with the Agency, a union, legal forums, the media, or other third parties are unlawful.”
- Non-disparagement clauses should be “limited to employee statements about the employer that meet the definition of defamation,” which means the non-disparagement provision should only apply to statements that are maliciously untrue, made with knowledge of the falsity and with reckless disregard for truth or falsity.
- Including “savings clauses” or “disclaimers” in the agreement will not cure an overly broad confidentiality or non-disparagement provisions, but including language that the agreement should not be construed in a way that it violates the Act are helpful.