NLRB Limits Confidentiality, Non-Disparagement Agreements
The following article was provided by Berchem Moses PC. It is posted here with permission.
The National Labor Relations Board issued a decision Feb. 21, 2023 in the case of McLaren Macomb and Local 40 RN Staff Council, which significantly limits an employer’s right to include broad confidentiality and non-disparagement provisions in separation agreements.
The 4-1 decision by the board reversed two Trump administration-era NLRB decisions.
More specifically, it ruled that such provisions were a violation of the National Labor Relations Act, which protects the rights of “employees” to engage in concerted protected activity and to discuss the terms and conditions of their employment.
Importantly, the decision only applies to private sector “employees,” which broadly speaking does not include supervisors, managerial, and executive employees.
Thus, separation agreements which include such provisions for supervisory and managerial employees, and (for now) public sector employees, continue to be legal.
While the NLRB signaled that “narrowly drawn” confidentiality and non-disparagement provisions might be acceptable, it did not provide guidance on what it would take to qualify as “narrowly drawn,” so reliance on that exception at this time is risky.
Importantly, however, the confidentiality prohibition only applies to the employee’s employment, and does not restrict an employer’s right to prohibit disclosure of confidential business information, such as trade secrets.
Going forward, separation agreements for employees should either not contain confidentiality and non-disparagement provisions, or, if included, should be narrowly drafted and vetted through legal counsel.
So what do you do about existing separation agreements which include such provisions?
The answer is likely nothing.
Since the statute of limitation on complaints under the National Labor Relations Act is six months, any agreement that old or older should be safe.
As for severance agreements entered into within the last six months, time will tell whether the NLRB’s decision will be applied retroactively.
In the interim, it may be best not to enforce such provisions to avoid being a test case for this uncharted territory.
About the author: Floyd Dugas is a senior partner at Berchem Moses PC. He leads the firm’s municipal labor and employment practice. He is a member of the firm’s labor and employment and education law departments, and represents both private and public sector employers.
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