NLRB Restricts Confidentiality and Non-Disparagement Clauses in Severance Agreements

By Jed Weiner

In February 2023 the National Labor Relations Board (NLRB) issued a decision that employers may not condition severance payments on an employee agreeing to confidentiality and non-disparagement provisions (McLaren Macomb (2023)). The McLaren decision applies to union and non-union employees, but not employees who are supervisors or independent contractors. 

The scope of the McLaren ruling remains unsettled. Specifically, it is not clear whether all confidentiality and non-disparagement clauses are prohibited or just broadly drafted ones. It will likely be clarified by future rulings, including a likely appeal.  In addition, it is not clear whether the ruling applies to preexisting severance agreements. 

In response to McLaren, employers may decide to remove confidentiality and non-disparagement clauses from severance agreements. They may decide to redraft preexisting severance agreements. 

It is possible that the NLRB was concerned that the confidentiality and non-disparagement clauses the McLaren case could be interpreted as preventing employees from reporting to the NLRB, discuss severance or wages, or engage in other concerted activities protected by Section 7 of the National Labor Relations Act. Employers with higher risk tolerance may decide to continue to include confidentiality and non-disparagement clauses in severance agreements while tailoring them to address the above concerns.