Get answers to five common questions on the recent clarification on severance agreements.

In February 2023, the National Labor Relations Board (NLRB) made a decision in McLaren-Macomb case about severance agreements, which covered overly broad clauses on non-disparagement and confidentiality agreements. Recently, the NLRB general counsel issued a memo clarifying how severance agreements can be tailored. Here are answers to five common questions that stemmed from the case.

Are severance agreements now banned?

In a word, no. General Counsel Jennifer Abruzzo explained, “Lawful severance agreements may continue to be offered, maintained and enforced if they do not have overly broad provisions that affect the rights of employees to engage with one another to improve their lot as employees.”

Dos the NLRB decision have a retroactive effect?

Yes, the decision has a retroactive application, which means it can affect previous agreements, specifically if they are overly broad in their reach.

Are there any non-disparagement provisions that could be found lawful?

Yes. The memo states, “A narrowly tailored, justified, non-disparagement provision that is limited to employee statements about the employer that meet the definition of defamation as being maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity, may be found lawful.”

What happens if just one provision of the severance agreement is overbroad?

The overly broad provision would be voided but the rest of the agreement would remain in effect.

Are confidentiality provisions in a severance agreement ever lawful?

Yes, within certain parameters. A narrowly tailored confidentiality clause “to restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications may be considered lawful.”

If your business utilizes severance agreements, be sure to consult with a labor attorney to ensure documents adhere to current guidelines and are not overly broad.

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