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Dusting Off Standard Separation Agreements: 5 Key Takeaways from the National Labor Relations Board’s Decision in McLaren Macomb to Ensure Compliance for Employers and Employees

by thatcherlawfirm | Feb 24, 2023 | Employment Law |

By Matthew J. Stokes

On February 21, 2023, the National Labor Relations Board (the “Board”), the federal agency responsible for protecting employees’ rights to engage in union-related and union activities, issued a landmark decision in McLaren Macomb holding that broad confidentiality, non-disclosure, and non-disparagement provisions in separation agreements are unlawful. In light of the McLaren Macomb decision, both union and non-union employers should promptly revisit standard separation agreements to ensure the post-employment restrictions are sufficiently narrow to be enforceable. Conversely, former employees subject to a separation agreement with any such post-employment restrictions may want to contact legal counsel to better understand their post-employment obligations (if any remain). Thatcher Law Firm’s Labor & Employment Practice Group explores 5 key takeaways from the Board’s McLaren Macomb decision to ensure compliance for employers and employees below.

1. What happened in the McLaren Macomb case? In McLaren Macomb, an employer downsized during the height of the Covid-19 pandemic. In doing so, the employer offered separation agreements to terminated employees that contained broad confidentiality and non-disclosure clauses as well as a non-disparagement provision.

• “6. Confidentiality Agreement. The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.”

• “7. Non-Disclosure. At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents and representative.”

• “Injunctive Relief. In the event that Employee violates the provisions of paragraphs 6 or 7, the Employer is hereby authorized and shall have the right to seek and obtain injunctive relief in any court of competent jurisdiction. If Employee individually or by his/her attorneys or representative(s) shall violate the provisions of paragraph 6 or 7, Employee shall pay Employer actual damages, and any costs and attorney fees that are occasioned by the violation of these paragraphs.”

In examining the language above, the Board explained that employers violate the National Labor Relations Act (“NLRA”) when they even offer a separation agreement with provisions that would restrict employees’ exercise of NLRA rights. “Such an agreement has a reasonable tendency to restrain, coerce, or interfere with the exercise of [NLRA] rights by employees, regardless of the surrounding circumstances.” What is more, the Board emphasized that employees’ NLRA rights “. . . do not depend on the existence of an employment relationship between the employee and the employer” and thus extend beyond termination of an employment relationship. Accordingly, the Board held that the above confidentiality and non-disclosure clauses as well as the non-disparagement provision were unlawful because they restrained the employees’ legal rights to engage in “protected concerted activities.”

2. How does the McLaren Macomb decision apply to non-union workforces? Although the NLRA is most often referred to in the context of unionized workforces, the Act also extends to non-unionized workforces whose employees may engage in protected concerted activities. Indeed, under Section 8(a)(1) of the NLRA, employers are legally prohibited from interfering with, restraining employees from engaging in, and/or coercing employees to engage in protected concerted activities.

3. What are protected concerted activities? Protected concerted activities may include but are not limited to: (1) discussing pay and benefits, working conditions, and scheduling; (2) participating in a concerted refusal to work in unsafe conditions; and (3) joining with co-workers to talk directly to an employer, to a government agency, or to the media about problems in the workplace. Employees may engage in these protected activities through various channels. “These channels include administrative, judicial, legislative, and political forums, news- papers, the media, social media, and communication to the public that are part of and related to an ongoing labor dispute.”

4. Employers: Does McLaren Macomb prevent us from including confidentiality, non-disclosure, and non-disparagement provisions in separation agreements? Not necessarily. The Board’s decision in McLaren Macomb was limited to broad confidentiality, non-disclosure, and non-disparagement provisions. So, employers seeking to maintain similar provisions in their separation agreements (or any other employment related agreements) should promptly contact legal counsel to ensure their standard provisions are sufficiently narrow to be enforceable.

5. Employers & Employees: Considering McLaren Macomb, what else should we know about existing separation agreements? Due to the holding in McLaren Macomb, pre-existing separation agreements containing nondisclosure, non-disparagement, and confidentiality provisions but no severability provision may no longer be enforceable. However, where an agreement contains an unlawful clause or provision and a severability clause, its lawful clauses and provisions will generally remain enforceable despite the presence of an unlawful clause or provision. Accordingly, employers and employees who are parties to any separation agreements should verify that a severability provision was included in the agreement.

Thatcher Law Firm is monitoring the application of the McLaren Macomb decision and its implications in workplaces and has experienced attorneys available to help both companies and employees navigate the hurdles of compliance. Should your company need a separation agreement or have a question regarding an existing one, please do not hesitate to reach out. Likewise, employees wondering how the McLaren Macomb decision may impact their obligations under an existing separation agreement may schedule a consultation with us.

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