As we previously reported, the National Labor Relations Board’s (NLRB or Board) McLaren decision found that employers violate the National Labor Relations Act (NLRA) when they offer employees severance agreements that require employees to broadly waive their rights under Section 7 of the Act. At that time, there was an outstanding question as to whether the decision would apply to agreements issued prior to February 21, 2023, as the NLRB was silent on this issue, and many had opined that it was not retroactive. However, a recent guidance memo issued by the NLRB’s General Counsel, Jennifer Abruzzo suggests otherwise.
For background, the McLaren decision stated:
- Employers may not offer employees severance agreements that require them to broadly waive their rights under Section 7 of the National Labor Relations Act; and
- Offering employees a severance agreement that requires them to broadly waive their Section 7 rights violates Section 8(a)(1) of the NLRA.
In a recently released memo, the Board’s General Counsel affirms that the decision will apply retroactively due to the NLRA’s six-month statute of limitations period. Due to the statute of limitations, severance agreements entered into six months prior to February 21, 2023 (August 20, 2022) could be found to be in violation of the NLRA if they contain unlawful provisions. The memo further signals that the ruling could also extend to non-compete, non-solicitation and no-poaching clauses if they include overly broad restrictions on employees’ protected rights. Furthermore, the memo also asserts that in some cases the ruling could apply to supervisors. Although supervisors are not generally protected by the NLRA, the memo explains that the NLRA does protect a supervisor against retaliation for refusing to commit an unfair labor practice against employees on their employer’s behalf.
While the memo does not carry the weight of a Board ruling, it is intended to provide clarification to all NLRB field offices when responding to inquiries stemming from the McLaren decision. As a result, employers should prepare for NLRB enforcement actions to be aligned with the General Counsel’s memo.
As a reminder, the McLaren decision and the newly issued memo do not outright prohibit the use of separation agreements, only those with overly broad provisions that affect employees’ rights to engage in protected activity under the NLRA.
Next Steps for Employers
The McLaren decision is a reminder that the NLRA protects employees’ right to organize and bargain collectively. Employers cannot interfere with employees’ Section 7 rights, and they cannot require employees to waive their Section 7 rights as a condition of employment.
Employers should review and adjust the language in their severance agreements to ensure that any language contained therein does not make payment of severance contingent upon the employee waiving their rights, or what may be construed as their rights, under the NLRA including, but not limited to, requiring the fact and contents of the agreement, including the amount of severance to be kept confidential or prohibiting the employee from disparaging the employer, along with its officers, directors, employees, agents, and representatives.
It is recommended that employers seek the assistance of legal counsel in drafting of severance agreements to ensure that their scope cannot be considered overly broad and contains reasonable safeguards such as safe harbor language.