NLRB General Counsel Issues Compliance Guidance on Recent Ruling Limiting Severance Agreements
On 22 March 2023, the Office of the General Counsel of the National Labor Relations Board (General Counsel) issued a policy memo (March 22 GC Memo)1 clarifying the recent McLaren Macomb decision by the National Labor Relations Board (NLRB or Board),2 which restricted the ability of employers to draft broadly worded severance agreements that purportedly waived employees’ rights under the National Labor Relations Act (NLRA or the Act).3
The March 22 GC Memo offers employers further guidance on how the General Counsel interprets McLaren Macomb and what it believes employers are now permitted to include in severance agreements proffered to employees. It was prompted by “inquiries from workers, employers, labor organizations, and the public about implications stemming from that case.”4 Although, the March 22 GC Memo does not have the force of law, is not precedential, and does not bind litigants before the Board, it is a strong predictor of what types of arguments the General Counsel is likely to make to, and what types of cases it is likely to prosecute before, an increasingly labor-friendly Board.
SEVERANCE AGREEMENTS ARE NOT FORBIDDEN . . .
The central holding of McLaren Macomb, per the General Counsel, is that “where a severance agreement unlawfully conditions receipt of severance benefits on the forfeiture of statutory rights, the mere proffer of the agreement itself violates Section 8(a)(1) of the Act because it has a reasonable tendency to interfere with or restrain the prospective exercise of those rights.”5
Not surprisingly, the March 22 GC Memo explained that McLaren Macomb does not ban severance agreements. In fact, the General Counsel noted that decades-long Board precedent has “approved severance agreements where the release waived only the signing employee’s right to pursue employment claims and only as to claims arising as of the date of the agreement.”6 Thus, it is clear that, post-McLaren Macomb, employers may continue to offer, maintain, and enforce severance agreements, provided they are not overly broad, e.g., infringing on employees’ Section 7 right under the NLRA to engage in protected concerned activity, which includes communicating with the NLRB, labor unions, media organizations, legislative bodies, former and current employees, as well as other third parties. Furthermore, the General Counsel does not take the position that overbroad and unlawful language in one provision of a severance agreement invalidates the entire agreement. Rather, only the offending language would be voided.7
. . . BUT THE GENERAL COUNSEL ENVISIONS A DRASTICALLY CHANGED LANDSCAPE
The moral of McLaren Macomb is that employers must remove any language from their severance agreements that condition benefits on employees forfeiting their NLRA rights. The March 22 GC Memo attempts to clarify what employers can and cannot, and should or should not, do in that regard, while simultaneously advocating for substantial limitations on how severance agreements are to be evaluated, who McLaren Macomb applies to, and in what manner employers may go about updating and ultimately defending their severance agreements.
First, the General Counsel indicates that the scrutinized language in a severance agreement stands on its own. The “[s]urrounding circumstances do not matter when objectively analyzing whether a provision is facially lawful or not.”8 A provision is either valid on its face or it is not. It does not matter if the employer verbally clarified the agreement in a manner consistent with existing law. It does not matter if the employee voluntarily signed the agreement. It does not matter if the employee suggested the language in the agreement. The March 22 GC Memo suggests that the Board’s only focus should be the objective language of the agreement, with no consideration given to other subjective considerations. Thus, the General Counsel has staked out the position that an employer cannot defend its agreement outside of the words on the paper.
Second, the March 22 GC Memo rejects the notion that a general savings clause in a severance agreement would necessarily cure overly broad provisions. A savings clause will not work, in the General Counsel’s view, if the severance agreement provides mixed or inconsistent messages about the exercise of Section 7 rights. The General Counsel did suggest, however, that a savings clause with a very detailed listing of nine specific activities protected by Section 7 of the Act might operate in a prophylactic manner.9
Third, the March 22 GC Memo argues that McLaren Macomb applies not just to current employees but to former employees as well. One of the issues left untouched by McLaren Macomb was whether former employees were covered by its ruling, even though the Act itself only applies to “employees.” While it was perhaps too much to ask that recently terminated employees were not subject to McLaren Macomb’s ruling, there was certainly some appeal to the argument that former employees who had been terminated months (or even years) ago were not employees within the meaning of the Act. The March 22 GC Memo, though, seems to stake out a clear position that long-gone former employees are still protected, rendering settlement agreements reached with them equally subject to McLaren Macomb as severance or separation agreements provided at the time of termination.
Fourth, the March 22 GC Memo takes the position that the confidentiality, nondisclosure, and non-disparagement provisions at issue in McLaren Macomb are not the only types of provisions that may be subject to its ruling. The General Counsel asserts that provisions such as noncompetition clauses, non-solicitation clauses, no-poaching clauses, broad liability releases, and cooperation clauses that require the separated employee to participate in current or future investigations or proceedings all may cross swords with McLaren Macomb.10
Fifth, the March 22 GC Memo even suggests that supervisors who are ostensibly not covered by the Act are nevertheless potentially subject to the restrictions set forth in McLaren Macomb. The General Counsel opines that supervisors who are proffered overbroad severance agreements fall within the reach of McLaren Macomb if they can assert that they are being fired in retaliation for refusing to aid the employer’s alleged unfair labor practices or if they are restricted by the severance agreement from participating in a Board proceeding.11
Sixth, the March 22 GC Memo argues that the decision in McLaren Macomb applies not just to severance agreements entered into the future but all past agreements as well. The General Counsel also opined that the normal six-month statute of limitations for filing unfair labor practice charges under the Act would not apply to past agreements that the employer seeks to enforce under what appears to be some sort of continuing violation argument.12
NEXT STEPS FOR EMPLOYERS
It goes without saying that employers, after McLaren Macomb and the March 22 GC Memo, should narrowly tailor any restrictions on employee activity to the “legitimate business justifications” justifying those restrictions, such as protecting trade secrets or proprietary information. They should also incorporate, where possible, existing Board law in crafting the proper standards for provisions like non-disparagement clauses.
The March 22 GC Memo would have employers consider other potential steps as well to bring their agreements into line. For example, employers may wish to: (a) evaluate the objective language in its severance agreements, divorced from any consideration of the surrounding facts; (b) consider adopting the detailed savings clause recommended by the General Counsel, particularly where other language in their severance agreements is potentially overbroad; (c) consider the impact of McLaren Macomb on other provisions in severance agreements apart from nondisclosure, confidentiality, and non-disparagement, as well as on policies of general application to their employees; and (d) carefully evaluate the reasons for a supervisor’s termination before giving that supervisor a release that is not compliant with McLaren Macomb. Finally, given that the General Counsel takes the position that McLaren Macomb is retroactive, that former employees are covered by the ruling, and that the enforcement of old agreements may lead to claims under the Act that are not time-barred, employers may consider reaching out to former employees and advising them, as the General Counsel suggests, that overbroad provisions in agreements will not be enforced (even though the General Counsel gives no assurance that such actions will cure a “technical violation” of the Act).13
However an employer chooses to respond to McLaren Macomb and the March 22 GC Memo, it should do so holistically and should consider seeking the advice of legal counsel in preparing a thoughtful plan of action.
The March 22 GC Memo asserted what the General Counsel described as its “public capacity to protect public rights” under the NLRA with the goal of ensuring “employees’ freedom to engage in Section 7 rights and to assist each other and access the Agency.”14 To that end, the Board declared that the “future rights of employees as well as the rights of the public may not be waived in a way that precludes future exercise of Section 7 rights.”15 McLaren Macomb is but a small part of the General Counsel’s efforts to reshape U.S. labor law. Another General Counsel memo, dated 20 March 2023, outlined the General Counsel’s road map for revisiting and rewriting existing Board precedent, much of it long-standing.16 At this moment in time, employers cannot simply rely on the presumption that what was legal last year will remain legal for the foreseeable future, and they should remain vigilant about potential changes to federal labor law. The lawyers of K&L Gates’ Labor, Employment, and Workplace Safety practice regularly counsel clients on a wide variety of issues related to compliance with the NLRA and related Board guidance and are well-positioned to provide guidance and assistance to clients on this significant development.
1 National Labor Relations Board Memorandum GC 23-05 (Mar. 22, 2023).
2 372 NLRB No. 58 (Feb. 21, 2023) [hereafter McLaren Macomb].
3 See Michael A. Pavlick & Taylor J. Arluck, NLRB Imposes Broad Restrictions on Severance Agreements, K&L GATES HUB (Feb. 24, 2023), https://www.klgates.com/NLRB-Imposes-Broad-Restrictions-on-Severance-Agreements-2-24-2023.
4 March 22 GC Memo, supra note 1 at 1.
6 Id. at 2.
7 Id. at 4.
9 Id. at 6.
10 Id. at 6-7.
11 Id. at 3.
13 Id. at 4.