USA: the National Labor Relations Board (“NLRB” or the “Board”) released a memorandum on severance agreements

The National Labor Relations Board (NLRB ) recently held, in McLaren Macomb, 372 NLRB No. 58, that an employer violates Section 8(a)(1) of the National Labor Relations Act (NLRA) with severance agreements containing overly broad non-disparagement and confidentiality of agreement clauses with employees.
The decision states that offering employees such kind of agreement restricts their ability to exercise their rights to self-organisation, join labour organizations, and engage in "other concerted activities" to improve the workplace.
On 23 March 2023, the NLRB General Counsel issued a memorandum (Memorandum GC 23-05) to guide the issue, taking an expansive view of the decision.

The main topics addressed in the guidance are the following:

1. Are severance agreements banned?

No, severance agreements, as a general practice, are not unlawful.

The memorandum underlines, however, that severance agreements cannot contain any clause infringing on employees' rights to "engage with one another to improve their lot as employees." Moreover, confidentiality provisions protecting confidential and proprietary business information and trade secrets may be lawful, as well as clauses that are "narrowly tailored" (but GC Memo 23-05 does not define what would be considered "narrowly tailored").

2. What kind of clauses can be considered unlawful?

- Provisions with no temporal limitations;

- provisions with no definitions (especially of terms such as "disparage" and "harm") that restrict disclosures regarding wages, hours, and terms and conditions of employment to "any third party.";

- provisions that define the employer too broadly, including "its parents and affiliated entities and their officers, directors, employees, agents, and representatives."

- provisions that restrict an employee's ability to speak directly to co-workers, union representatives, or Board members.

3. Does this limitation only apply to Non-Disparagement and Confidentiality Clauses?

Other agreements and provisions could interfere with employees' exercise of their Section 7 rights, such as offer letters, non-compete clauses, no solicitation clauses, no-poaching clauses, broad liability releases, and covenants not to sue that go beyond employment claims and matters.

3. Do unlawful provisions invalidate the entire severance agreement?

No, they will not render void the entire agreements, but only provision(s) found unlawfully broad.

4. What happens if an employee does not sign the severance agreement?

An employee's refusal to sign a severance agreement has no bearing on whether the agreement's provisions are lawful.

While those and other issues raised by the McLaren decision are clarified, employers should review their agreements and rewrite some clauses according to the guidance.