NLRB Limits on Separation Agreements Are Retroactive

Author: Robert S. Teachout, XpertHR Legal Editor

March 24, 2023

A recent National Labor Relations Board (NLRB) ruling that nondisparagement or confidentiality clauses in separation agreements are unlawful if they would restrict or interfere with an employee's labor rights applies retroactively to previously signed agreements, says a new guidance memo from General Counsel Jennifer Abruzzo.

The memo does not carry the weight of a Board ruling but is intended to provide clarification to all NLRB field offices when responding to inquiries stemming from the Board's recent McLaren Macomb decision. As a result, employers should prepare for NLRB enforcement actions in line with Abruzzo's memo.

Abruzzo explained that, while the proffer of an unlawful severance agreement is subject to the usual National Labor Relations Act (NLRA) six-month statute of limitations, a charge of maintaining and/or enforcing a previously entered severance agreement with unlawful provisions would not be time-barred. In such cases, she notes, such a charge would usually be resolved by requiring an employer to notify former employees that the overbroad provisions in their severance agreements no longer apply.

Abruzzo also asserts that in some instances the McLaren Macomb ruling could apply to a supervisor. Although supervisors are not generally protected by the NLRA, she explained, the Act does protect a supervisor against retaliation for refusing to commit an unfair labor practice against employees on their employer's behalf. For example, it would apply if an employer retaliated against a supervisor who refused to proffer an unlawfully overbroad severance agreement, or if the supervisor is offered a severance agreement preventing the supervisor from participating in a Board proceeding.

Abruzzo also states in the memo that the ruling could also extend to noncompete, nonsolicitation and no-poaching clauses if they include overly broad restrictions on employees' protected rights. It also could apply to broad liability releases that go beyond employment claims and matters or to cooperation requirements regarding current or future investigations or proceedings affecting employees' Section 7 rights.

In a positive note for employers, the memo states that McLaren Macomb does not ban all separation agreements - only those with overly broad provisions that affect employees' rights to engage with one another to improve their working conditions. It also explains that an overbroad nondisparagement or confidentiality clause would not void an entire separation agreement, and the expected remedy would be to void only the offending clause.

In reaffirming the Board's ruling, Abruzzo further stated that employers "have no legitimate interest in maintaining a facially unlawful provision in a severance agreement, much less an interest that somehow outweighs the Section 7 rights of employees."