On February 21, 2023, the National Labor Relations Board (the “Board”) issued a decision that returns to previous precedent, holding that employers may not offer employees severance agreements that require employees to broadly waive their rights under the National Labor Relations Act (“NLRA”).

Under the Board’s new rule issued in McLaren Macomb, 372 NLRB No. 58 (2023), which applies to union and non-union employees alike, the “mere proffer” of a severance agreement that conditions receipt of benefits on the “forfeiture of statutory rights”—like the acceptance of overbroad confidentiality and non-disparagement provisions—“plainly has a reasonable tendency to interfere with, restrain, or coerce the exercise of those rights [afforded under Section 7 of the NLRA]” in violation of Section 8(a)(1) of the NLRA. Prior to this, two of the Board’s 2020 decisions in Baylor University Medical Center and IGT d/b/a International Game Technology held that it was not unlawful, by itself, for an employer to offer similar severance agreements with such clauses in return for severance payments.

The decision joins a wider landscape of protective measures in recent years that are aimed at discouraging or prohibiting confidentiality and/or non-disparagement provisions in settlements or other agreements. For instance, the Speak Out Act passed by Congress last year and signed into law by President Biden on December 7, 2022, makes void any nondisclosure or non-disparagement clause that attempts to preemptively prohibit employees from talking about potential future instances of sexual harassment or assault in the workplace. Previously, other similar federal laws prohibited forced arbitration in sexual assault and sexual harassment disputes, as well as eliminated an employer’s ability to make tax deductions for settlements, payouts, and attorney’s fees in cases related to sexual harassment or abuse if such payments were subject to a nondisclosure agreement.

While McLaren involved language the current Board deemed overbroad, the question is still open as to whether employers can maintain lawful confidentiality and non-disparagement provisions if they are narrowly tailored to mitigate the concerns contained in the decision. Employers should review any non-disparagement and confidentiality provisions they are proffering to employees or potential employees, regardless of the type of document in which the clauses are incorporated. Moreover, a well-drafted “severability” provision may help save the rest of an agreement if certain provisions are found to be unlawful or unenforceable.

Murtha Cullina will closely follow and report on any federal court appeal of the McLaren decision, as well as any related decisions and/or legislation concerning confidentiality and non-disparagement clauses.

Contact the authors of this alert Emily McDonough Souza, Salvatore Gangemi and Patricia Reilly to learn more about how this decision can impact your business.

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Photo of Emily McDonough Souza Emily McDonough Souza

Emily McDonough Souza is an Associate in the Litigation Department and the Labor and Employment Practice Group of Murtha Cullina LLP.  Her experience includes representing clients in a broad range of disputes involving insurance coverage, business torts, and contractual rights, as well as…

Emily McDonough Souza is an Associate in the Litigation Department and the Labor and Employment Practice Group of Murtha Cullina LLP.  Her experience includes representing clients in a broad range of disputes involving insurance coverage, business torts, and contractual rights, as well as representing employers in claims involving discrimination and retaliation, breach of non-compete and restrictive covenants, and wage and hour violations.  Emily has regularly appeared on behalf of clients in both state and federal court matters, including oral arguments, mediations, depositions, and pretrial conferences.

Prior to joining Murtha Cullina, Emily clerked for the Honorable Eliot D. Prescott of the Connecticut Appellate Court.  She received her J.D. magna cum laude from Quinnipiac University School of Law, where she served as the Executive Managing Editor of the Quinnipiac Law Review. Emily earned her B.S. magna cum laude from the University of Connecticut, where she was a member of the Honors Program.

Photo of Salvatore G. Gangemi Salvatore G. Gangemi

Salvatore G. Gangemi is a Partner in the Litigation Department of Murtha Cullina and a member of the Labor and Employment Practice Group. He advises clients with respect to state, federal and local employment laws. In addition, he litigates matters involving misappropriation of…

Salvatore G. Gangemi is a Partner in the Litigation Department of Murtha Cullina and a member of the Labor and Employment Practice Group. He advises clients with respect to state, federal and local employment laws. In addition, he litigates matters involving misappropriation of trade secrets, restrictive covenants, breach of employment contract, fiduciary duty, and other work-related common law claims. Sal also counsels clients on day-to-day issues involving workplace management and administration, including requests for reasonable accommodation for disabilities, for family and medical leave, and wage and hour issues.  He conducts employment law training on a variety of topics, including sexual harassment prevention and wage/ hour compliance.  He also drafts employment policies and agreements, and assists clients in auditing worker classification practices and policies both in the context of the Fair Labor Standards Act and state laws governing independent contractor determinations.

Photo of Patricia E. Reilly Patricia E. Reilly

Patricia E. Reilly, Chair of the Labor and Employment Practice Group, is an experienced litigator who represents clients in a wide range of cases including, employment discrimination and related torts, non-compete and restrictive covenants, wage and hour, breach of contract, unfair trade practices…

Patricia E. Reilly, Chair of the Labor and Employment Practice Group, is an experienced litigator who represents clients in a wide range of cases including, employment discrimination and related torts, non-compete and restrictive covenants, wage and hour, breach of contract, unfair trade practices, and business disputes. In addition to maintaining a thriving litigation practice, Tricia counsels clients on a variety of employment-related issues including hiring, firing, and discipline; wage and hour; state and federal FMLA; sexual harassment investigations and prevention; Title IX; pregnancy and disability accommodation; and avoidance of employment discrimination liability.

Tricia is listed as a leading Labor and Employment Lawyer in Chambers USA.  She is listed in Best Lawyers in America®, and in 2017, Best Lawyers in America® recognized her as “Lawyer of the Year”, New Haven, Litigation – Labor and Employment. Tricia is a member of the American Bar Association, the Connecticut Bar Association and the New Haven County Bar Association.  She received her B.A. from Wesleyan University and her J.D. from University of California, Berkeley School of Law.