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NLRB Further Restricts Severance Agreements

Employers take note:  On March 22, 2023, the National Labor Relations Board’s Office of General Counsel issued a guidance memo explaining and expanding the recent McLaren Macomb decision that dramatically limits the use of non-disclosure and confidentiality provisions in severance agreements.  The new guidance emphasizes that the mere proffer of a severance agreement with overly broad terms constitutes an unfair labor practice, and clarifies that offering or enforcing violative severance agreements may be penalized retroactively.  Further, those scrutinized provisions may not be included in severance agreements even if requested by employees.  The Office of General Counsel further opined that now even supervisors may fall under this analysis in some cases.

There is even more cause for concern.  At the end of the guidance memo, the General Counsel set forth a number of other common provisions that she believes may interfere with Section 7 rights.  Those include non-compete language, no solicitation/no-poaching clauses, broad liability releases that go beyond employment claims, and cooperation requirements.

What should employers do?  First, immediately stop using “standard” severance agreement.  Second, be extremely careful in drafting agreements that restrict disclosure, competition, and hiring, or that require cooperation during the severance period.  Third, make sure release language is narrowly tailored, key terms are defined, and temporal limits are included.

The recent McLaren decision and OGC guidance memo significantly change how severance agreements should be prepared. The Sulloway Labor & Employment team is ready to help.  Contact Bill Pandolph or Chris Pyles if you have questions or need assistance with this issue or other employment matters.