It remains unclear whether the NLRB’s ruling in McLaren about the permissible scope of confidentiality and nondisparagement provisions will withstand judicial scrutiny.

Confidentiality and nondisparagement provisions in severance and other employment-related agreements continue to be subject to significant scrutiny. In February 2023, the National Labor Relations Board (NLRB) held in McLaren Macomb, 372 NLRB No. 58 (2023) that merely offering severance agreements with broad confidentiality and nondisparagement provisions to nonmanagerial and nonsupervisory employees violates the National Labor Relations Act (NLRA). See our previous Alert. The NLRB reasoned that these provisions violate employee rights under Section 7 of the NLRA, because they tend to chill protected employee communications about topics such as working conditions and/or terms and conditions of employment, as well as the filing of unfair labor practice charges.

When presented with the opportunity to review this ruling―which was inconsistent with both prevailing business practices and NLRB precedent―the U.S. Court of Appeals for the Sixth Circuit left it undisturbed and decided the appeal upon other grounds. It remains unclear whether the NLRB’s ruling in McLaren about the permissible scope of confidentiality and nondisparagement provisions will withstand judicial scrutiny.

Accordingly, employers remain subject to unfair labor practice charges for including nondisparagement and confidentiality provisions in separation and other employment-related agreements that run afoul of the McLaren decision. For example, an administrative law judge recently held that an employer violated the NLRA by entering into separation agreements including a nondisparagement provision prohibiting negative remarks about the employer and its managers and a confidentiality provision prohibiting the disclosure of the existence or terms of the agreement. Significantly, this case applied McLaren retroactively to agreements entered into before McLaren was decided.

The Securities and Exchange Commission (SEC) has also instituted enforcement actions and imposed significant penalties against employers (including privately held companies) that have entered into separation agreements with confidentiality provisions that may chill communications with the SEC or limit the ability of employees to obtain monetary relief from governmental agencies.

Employers should review and make any needed revisions to the provisions in separation agreements, confidentiality agreements and employment agreements as well as codes of conduct relating to confidentiality, nondisparagement and reports to governmental authorities in light of McLaren and recent SEC enforcement actions, as well as recent state laws limiting nondisclosure agreements. While general templates are useful as a starting point, it is advisable to consult with counsel in the preparation of these documents.

For More Information

If you have any questions about this Alert, please contact Eve I. Klein, Jonathan D. Wetchler, Jonathan A. Segal, any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.