The General Counsel of the National Labor Relations Board, Jennifer Abruzzo, issued a memo setting forth her views regarding the future of severance agreements in the wake of the Board's recent decision in McLaren Macomb.
If there's any good news for employers that is to be taken from the memo, it's that severance agreements may still be lawful under the National Labor Relations Act. But many employers may find that the list of hoops they have to jump through for a severance agreement to pass muster may be unworkable.
Will 'Carve Outs' Excluding Protected Concerted Activity Be Enough?
In short, GC Abruzzo signaled that she would require more than "carve outs" that generally state that none of the nondisclosure, nondisparagement, and/or confidentiality clauses restrict employees from exercising their rights under the Act. Abruzzo asserts that such language might not be sufficient, as they tend to send "mixed or inconsistent messages."
But Abruzzo offers a roadmap for what may be acceptable. Severance agreements "may be lawful" if they include plain language that tells employees they have the right to:
- Organize a union to negotiate with their employer concerning wages, hours, and other terms and conditions of employment;
- Form, join, or assist a union, such as by sharing employee contact information;
- Talk about or solicit for a union during non-work time;
- Discuss wages and other working conditions with co-workers or a union;
- Take action with one or more co-workers to improve their collective working conditions;
- Strike and picket in certain circumstances;
- Take photographs or other recordings in the workplace under limited circumstances, provided the employer does not have an overriding interest;
- Wear a union insignia in the workplace, except under special circumstances; and
- Choose not to engage in any of these activities.
It is far from clear whether the Board or courts would agree that such a laundry list is warranted, much less required. But as the NLRB's General Counsel, Abruzzo has the prosecutorial discretion to raise the question of whether the absence of such provisions would render the severance agreement null and void.
(In a recent post, we also outlined Abruzzo's overall prosecutorial priorities for the NLRB.)
What Language Might Be Lawful?
With regard to confidentiality and nondisclosure clauses, GC Abruzzo conceded that clauses "narrowly-tailored to restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications may be considered lawful." On the other hand, Abruzzo would deem unlawful any clauses that could be read in a way that might prevent employees from engaging in protected concerted activities or from communicating with the NLRB, or communicating with a union, in legal forums, to the media, or with "other third parties."
Abruzzo was noncommittal with regard to what nondisparagement clauses might pass muster. After reinforcing her view that all workplace-related, public statements by employees have broad protection under the Act, Abruzzo allowed that "a narrowly-tailored, justified, nondisparagement provision" that addressed disloyal, defamatory, or maliciously untrue statements, and/or statements made with reckless disregard as to whether they are true or false, "may be found lawful."
Abruzzo went further to identify severance agreement terms that could chill employees' exercise of their rights under the Act. GC Abruzzo indicated she might take aim at:
- Noncompete clauses;
- No solicitation clauses;
- No poaching clauses;
- Broad liability releases and covenants not to sue that may go beyond employment claims and matters as of the effective date of the agreement; and
- Cooperation requirements involving any current or future investigation or proceeding involving the employer as that affects an employee's Section 7 right to refrain from doing so.
What About Old Agreements?
Noting that McLaren Macomb operates retroactively, GC Abruzzo leaves it to employers to decide whether they might revisit prior severance agreements to clarify or amend them in light of the Board's decision. But Abruzzo let it be known that attempts to enforce overbroad severance agreements now would constitute an unfair labor practice, regardless of when the agreement was executed.
Does McLaren Macomb Apply to Severance Agreements with Supervisors, Managers, or Executives?
Although the National Labor Relations Act extends Section 7 protections to employees, Abruzzo would extend those protections to supervisors, managers, or executives in some cases. For example, Abruzzo's position is that the prohibitions identified in McLaren Macomb would apply to severance agreements for supervisors or managers who were terminated because they refused to commit an unfair labor practice on the employer's behalf. In those circumstances, Abruzzo would find unlawful any proposal that could be interpreted as prohibiting the terminated supervisor from cooperating in an NLRB investigation of the employer's alleged misconduct.
We think Abruzzo's hypothetical would rarely – if ever – come into play for sophisticated employers. However, we raise it here because it raises concerns that vigorous enforcement of McLaren Macomb could lead to overreach.
While GC Abruzzo's memo provides guidance for employers going forward, her framework of requirements might seem unworkable to many. But knowing how the General Counsel – and regional directors across the country – will look at severance agreements is helpful, if only to give those who draft such agreements a better sense of where the pitfalls are and how deep they might be.
As confusing as the landscape might now appear, the Labor and Employment attorneys at Davis Wright Tremaine LLP stand ready to assist our clients by providing the expertise necessary to review, edit, and revise separation agreement templates to comply with the Board's decision.