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NLRB General Counsel Issues Memo On Severance Agreements In Light Of Recent NLRB Decision
On February 21, 2023, the National Labor Relations Board (NLRB) issued a decision in McLaren Macomb, 372 NLRB No. 58, finding that McLaren Macomb Hospital violated the National Labor Relations Act (NLRA) by offering employees severance agreements that required employees to broadly waive their rights under the NLRA. The severance agreements in this case contained overly broad non-disparagement and confidentiality clauses that tended to interfere with, restrain, or coerce employees’ rights under the NLRA. LCW issued a special bulletin on this case, which can be found here.
In light of the McLaren Macomb decision, private employers, such as schools, are deciding what changes need to be made to their severance agreements going forward. On March 22, 2023, the General Counsel for the NLRB issued a memorandum with answers to some common inquiries in light of the McLaren Macomb decision. While this memorandum is not binding law, it does provide helpful guidance for schools and other private employers.
The memorandum clarified severance agreements are not banned. Lawful severance agreements can continue to be offered, maintained, and enforced, so long as the terms of the agreements are not overly broad. The memorandum also indicated that while supervisors are generally not protected by the NLRA, and therefore not subject to the McLaren Macomb decision, there are certain circumstances where a supervisor may have protections under the NLRA. For example, when a supervisor refuses to proffer an unlawfully overbroad severance agreement or when a supervisor refuses to act on their employer’s behalf in committing an unfair labor practice against employees, the supervisor would be protected by the NLRA.
The memorandum stated that the decision has a retroactive effect, subject to a six-month statute of limitations. It also stated that severability clauses can typically be used to void only the provisions of a severance agreement that are overbroad or unlawful.
The memorandum noted that non-disparagement clauses can be used so long as they are drafted in a narrowly tailored way, for example, by limiting the non-disparagement clause to the definition of defamation, which is when an employee makes a maliciously untrue statement with knowledge that it is untrue or with reckless disregard for its truth or falsity. Similarly, confidentiality clauses may be considered lawful if they are narrowly tailored to restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications.
The full memorandum can be found here.
In light of the McLaren Macomb decision, many schools are reconsidering the terms of their severance agreements. For guidance, please reach out to LCW.