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The Bargaining Table

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We <a href="https://www.bakerlaw.com/alerts/nlrb-restricts-employers-ability-include-standard-confidentiality-non-disparagement-provisions-severance-agreements">recently wrote</a> about the National Labor Relations Board’s (“NLRB” or “Board”) decision in&nbsp;<a href="https://apps.nlrb.gov/link/document.aspx/09031d45839af64d">McLaren Macomb&nbsp;</a>(the “decision”) which reversed several Trump-era rulings that largely had allowed employers to proffer severance agreements to employees (generally, non-supervisors) containing broad confidentiality and non-disparagement provisions.

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&nbsp;In response to the widespread uncertainty related to the decision, NLRB General Counsel (“GC”) Abruzzo issued a <a href="https://urldefense.com/v3/__https:/lnks.gd/l/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDEsInVyaSI6ImJwMjpjbGljayIsImJ1bGxldGluX2lkIjoiMjAyMzAzMjIuNzM4MDc2MzEiLCJ1cmwiOiJodHRwczovL2FwcHMubmxyYi5nb3YvbGluay9kb2N1bWVudC5hc3B4LzA5MDMxZDQ1ODM5ZjZhZDEifQ.OMXqv0CwD-WWJpt8IQM9rHkjroT_wiRh9Q-EZs7mv5s/s/701470719/br/156567344784-l__;!!FRfqb9lMRA!0UBfs-5VQB3HswWvuP8Gyg0vBP_rvYX8OgTVAVZG3loV9ssUbLf_pBbKEbq8n-52KO0z3G6OQc7dd65llIajA2NsYFs$">memorandum</a> outlining her guidance and responses to common inquiries associated with the decision.

The BakerHostetler team has reviewed GC Abruzzo’s guidance. It’s important to note that GC Abruzzo’s guidance does not have the force of law. In essence, GC Abruzzo is akin to a prosecutor (although NLRB proceedings are not criminal in nature). Accordingly, her guidance only describes the types of cases and arguments that she intends to present to the NLRB to argue for a finding of a violation. Ultimately, it will be for the NLRB to decide what does and does not constitute a violation under McLaren Macomb. The NLRB may agree with GC Abruzzo – or it may not.

With that said, below is a summary of the inquiries addressed and associated responses – and a bit of commentary.

Q: Can employers still proffer, maintain, and enforce severance agreements according to GC Abruzzo?

A: Yes, but the GC will likely pursue a claim for a violation where a severance agreement contains typically broad confidentiality and non-disparagement provisions.

Q: Do confidentiality provisions remain lawful according to the Board?

A: Yes, but only if they are narrowly tailored to restrict the dissemination of proprietary or trade secret information for a fixed period of time based on legitimate business reasons. A clause that the GC views as having a “chilling effect” on exercising Section 7 rights (the right of employees to come together to organize a union or to discuss shared concerns regarding the workplace) will be considered to violate the National Labor Relations Act (“NLRA” or the “Act”).

Q: What about non-disparagement provisions? Is it possible to draft a provision that passes scrutiny?

A: Yes, but it will likely not be as effective as it once was. Non-disparagement provisions that are narrowly tailored and justified can be considered lawful. Under the Board’s ruling, the provision should be limited to meet the definition of defamation (i.e., maliciously untrue). However, in some circumstances, it is recommended to continue to include a prohibition on disparagement of the company’s products or services.

Q: Can I fix my severance agreement with a savings clause or disclaimer?

A: According to GC Abruzzo, probably not – unless an employer wants to insert a full statement of rights under Section 7 of the NLRA.

Q: What if there are extenuating circumstances that might warrant broad provisions? Or what if an employee or union representative requests broad provisions?

A: There is no end run, from the GC’s perspective. Her view is that surrounding circumstances of any kind do not matter and should be disregarded when analyzing whether a provision is facially lawful.

Q: Does it matter if an employee rejects or does not sign a severance agreement with overbroad provisions?

A: No. The mere proffer of an agreement with overly broad provisions constitutes unlawful employer conduct under McLaren Macomb. Therefore, whether an employee signs a severance agreement is irrelevant in determining whether there has been a violation of the Act.

Q: Does this decision cover severance agreements offered to supervisors as well?

A: In general, no. Section 7 rights apply only to nonsupervisory employees. However, GC Abruzzo suggested in her guidance that she may pursue violations associated with severance agreements presented to supervisors under certain circumstances. Further, the Act also protects supervisors from being retaliated against for refusing to act on their employer’s behalf in committing an unfair labor practice or from being barred from participating in Board proceedings.

A: According to GC Abruzzo, it is. But the Board hasn’t had that issue presented yet. And even if the Board finds that the decision has retroactive applicability, an appellate court may find otherwise. This is very much a “stay tuned” issue.

Q: How does the decision impact previously entered-into severance agreements with broad language? Would the entire agreement be invalidated?

A: GC Abruzzo has cautioned that, in her view, the 6-month statute of limitations to file an unfair labor practice charge might not apply to an employer’s ongoing enforcement of unlawful language that restricts Section 7 rights. But the finding of a violation pertaining to a confidentiality or non-disparagement provision may not invalidate the entire agreement, if those provisions can be severed.

Q: Are former employees covered by this decision too?

A: Yes, former employees are entitled to protections under the Act. The Board views former employees as having an important role in providing it with evidence and information.

Q: What is the impact of the decision on pre-employment communications or offer letters?

A: Provisions in any employer communication to employees that tend to interfere with Section 7 rights may be considered unlawful if they are not narrowly tailored to address a special circumstance justifying the limitation on workers’ rights.

Whether this new ruling will be enforced remains to be determined. Board orders by themselves are not self-enforcing instruments and are subject to appeal to the U.S. Court of Appeals. This decision will almost certainly eventually be reviewed by the appellate courts.

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Questions regarding whether a severance agreement violates employees’ Section 7 rights arise if an employee or union files an unfair labor practice charge with the Board. There are ordinarily other issues under the surface besides a severance agreement that cause an employee or union to seek Board intervention. Employers should weigh the benefit of a protective confidentiality and non-disparagement provision against the risk of an employee or union putting a severance agreement in jeopardy by filing an unfair labor practice charge.

Confidentiality and non-disparagement provisions are still capable of being lawfully drafted according to the Board, but routine language will likely need to be watered down to comply with the decision.

Employers should consider whether non-disparagement or confidentiality provisions are needed for all employees or just for employees who may, for example, have access to confidential and proprietary information.

Employers should still be able to use non-disparagement and confidentiality provisions for managerial employees, who are the employees with whom employers are typically concerned.

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Should you need to discuss the Board’s decision, this associated guidance, and its effect on your organization’s past or future severance agreements, the BakerHostetler Labor and Employment Practice Group is available to assist.

Q&A Regarding the NLRB’s Decision on Confidentiality and Non-Disparagement Provisions in Severance Agreements