National Labor Relations Board Rules that Non-Disparagement and Confidentiality Provisions in Separation Agreements May Violate Section 7 of the NLRA
On Tuesday, February 21, 2023, the three-member Democratic majority of the National Labor Relations Board (“NLRB”) issued a decision in McLauren Macomb, reverting back to pre-Trump era standards and ruling that non-disparagement and confidentiality provisions in a separation agreement violated the concerted right activity provisions of Section 7 of the National Labor Relations Act (“NLRA”).
Section 7 of the NLRA applies to most U.S. employers – including those with non-unionized workforces – and protects the rights of employees to engage in “concerted activity,” which includes when two or more employees take action for their mutual aid or protection regarding the terms or conditions of employment, or where one employee brings issues to management on behalf of a group of employees. Concerted right activities cover those water cooler types of conversations that employees may have about their wages or other terms or conditions of their employment. Most supervisors and managers are not covered by Section 7. The provision also does not cover independent contractors, public sector employees, and some agricultural workers.
In McLauren Macomb, the NLRB reviewed confidentiality and non-disparagement provisions in separation agreements between a unionized employer and several employees, and found the provisions were overbroad because they prohibited employees from disclosing information about their employment or the terms of their severances and making negative statements about their employer “to any third person,” including co-workers or a union. The NLRB ruled that such prohibitions effectively “chilled” employees’ Section 7 concerted activity rights to participate in discussions about or to improve the terms and conditions of their employment that are permitted under Section 7. In the decision, the NLRB also reminded that Section 7 rights extend to former employees, and to concerted efforts through a variety of channels including administrative, judicial, legislative, political, newspapers, the media, social media, etc.
The NLRB further ruled in McLauren Macomb that the mere inclusion of the provisions in the Agreements violated the NLRA. The employer could not – as it could have under Trump-era NLRB rulings – defend against the unfair labor practice charge that they would not enforce the provisions. Notably, while the decision focused on confidentiality and non-disparagement provisions in separation agreements, it may foreshadow a broader swing by the NLRB back to pre-Trump era Section 7 standards in other contexts.
Although it is clear that employers should again take extra care in drafting employee agreements and policies to ensure they do not restrain Section 7 rights, it is less clear how exactly to do that. A conservative approach may be to avoid inclusion of confidentiality and non-disparagement provisions altogether. However, other compliant options may be available.
Over the past few years, several states – including Oregon, Washington, California, and others – have enacted laws restricting employers from including provisions in agreements with employees that include non-disparagement and confidentiality provisions that would prevent employees from discussing certain harassment or discrimination or other unlawful conduct in the workplace. Employers in these states have found alternative ways to comply with those laws by including disclaimers in confidentiality or non-disparagement provisions stating that they do not prevent employees from engaging in such legally protected disclosures.
Similarly—and although untested before the current NLRB—non-interference carve-outs that clearly permit employees to engage in Section 7 concerted activities, file unfair labor practice charges, assist others in doing so, and cooperate with investigations and proceedings, may be a viable option to avoid a Section 7 violation without fully abandoning use of confidentiality and non-disparagement provisions. There may also be other options available to strike the balance between protecting employers’ legitimate business interests in protecting their reputation and confidential business data on the one hand, and protecting employees’ Section 7 rights on the other.
In light of the growing trend to restrict confidentiality and non-disparagement provisions in employee agreements and policies, employers should be careful in drafting employment and separation agreements moving forward and carefully consider whether and to what extent a non-disparagement or confidentiality provision is actually necessary. Employers will likely want to have legal counsel draft or review their agreements and policies to help ensure compliance with all applicable laws and provide the best defense possible to an unfair labor practice complaint or other legal action.
For those Agreements that are already in place with broad confidentiality or non-disparagement provisions, it is possible that an employee could bring a charge, but the issue for the NLRB will be whether the provisions were illegal when drafted—that is, under the then applicable NLRB rulings.
This article summarizes aspects of the law and does not constitute legal advice. For legal advice on your situation, you should contact an attorney.
- Jean Ohman BackShareholder
- Kelly RiggsShareholder