Enforcement Is Key as Employers Parse NLRB Severance Deal Advice

Employers want to see how the federal labor board will apply a new ban on overly broad gag orders in severance agreements—including old ones—before forging ahead with their own enforcement.

National Labor Relations Board General Counsel Jennifer Abruzzo issued guidance last week, seeking to clarify February’s McLaren Macomb decision that outlawed overly broad confidentiality and nondisparagement provisions in severance agreements. Maintaining or enforcing old pacts with now-illegal gag orders would also count as a violation of federal labor law, she said in the guidance.

While the McLaren Macomb ruling raised widespread confusion among employers and their attorneys about how the standard would be enforced and what sort of provisions would be permitted, last week’s guidance left attorneys perplexed, too.

“We don’t know exactly what is going to save these provisions but maybe that’s something the NLRB can’t give us, because they’re making granular decisions depending on what individual contracts say,” said Doug Hass, chief legal and compliance officer at Kimball Electronics. “We just have to watch the case law as it develops and go from there.”

Sara Robertson, a management-side associate at Polsinelli Law Firm, said she was “disappointed” that Abruzzo didn’t provide examples of permissible provisions.

“I think it’s clear that the NLRB general counsel is trying to dissuade employers from using these provisions at all,” Robertson said in an interview. “We are left with the same language from the McLaren decision which is vague and confusing. It’s not a particularly productive use of guidance.”

What Is Acceptable Language?

The memo isn’t legally binding like the board decision, but it can give companies a better idea how the agency’s attorneys will go about enforcing the ruling.

Abruzzo did offer some guidance on how companies can craft lawful provisions, saying employers should tailor confidentiality agreements to target dissemination of trade secrets based on “legitimate business justifications.”

Companies additionally will legally be allowed to proffer severance agreements with narrow nondisparagement provisions that prohibit maliciously untrue statements. She also emphasized that a disclaimer or “savings clause” wouldn’t make an overly broad gag order legal on its own, but could help an employer’s case if the disclaimer specifically focuses on employees’ rights to organize.

The memo gave little reassurance to companies that are looking to stay within the bounds of the law, said Andrew Turnbull, who represents employers for Morrison & Foerster LLP.

“The memo didn’t give any examples of what acceptable language here would look like,” Turnbull said. “They just listed off eight or nine Section 7 rights and I would say most companies are not going to be inclined to have some carve out in their severance agreement that’s going to have all that. And even if they did, it’s unclear whether that would save the agreement.”

In her memo, Abruzzo urged employers to contact workers who might be subject to these agreements and inform them that the gag orders are now voided. But Hass and Turnbull both agreed that many employers would skip this step, opting instead to not enforce the provisions.

“We lawyers tend to build contracts to prepare for some biblical flood and we end up with an agreement that has to jam in every possible scenario, but there are also other laws addressing these issues,” Hass said, referring to trade secret and slander laws. “If the contract violation is severe enough to go after someone, then you have a whole other body of law that’s going to protect you so I don’t see what you could be giving up by removing these measures.”

Robertson said she recommends to employers with a lower tolerance for risk to make a “good faith effort” to use the language provided by the guidance in their severance agreements.

Supervisors Included

While the National Labor Relations Act doesn’t typically apply to supervisors, Abruzzo’s memo made it clear that employers could violate the act if they retaliate against a supervisor who refuses to pass along an unlawful severance agreement to another worker. Employers also could break the law by offering provisions that prohibits supervisors from participating in NLRB proceedings.

Abruzzo’s attempt to include former supervisors could prove to be an overreach of the agency’s powers, Robertson said.

“You can’t generally retaliate against someone who’s no longer a supervisor and supervisors are entitled to only that really narrow protection,” she said. “If we are going to start extending certain board orders to supervisors, then I would question their legal authority to do that.”

Abruzzo’s memo also shed some light on what other kinds of provisions might be deemed unlawful in the future. She said noncompete, no solicitation, and no poaching clauses, along with broad liability releases, could illegally interfere with workers’ rights.

Amy Moor Gaylord, co-chair of the traditional labor law practice at Akerman LLP, said companies should take the extra step of examining more communications with employees—including separation agreements, offer letters, and employee handbooks.

“They should consider rewriting overly broad provisions that may cause the mere offering of the document to be deemed unlawful,” Gaylord said by email. “But that does not mean employers should simply eliminate confidentiality and non-disparagement provisions altogether. There is no one size fits all approach.”