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June 07, 2024

McLaren Macomb Gives Employers a Reason to Review Standard Agreements

Francine Bailey Hall

On February 21, 2023, the National Labor Relations Board (NLRB) decided McLaren Macomb (372 NLRB No. 58), a landmark ruling in which the NLRB held that the mere act of offering a severance agreement with terms that have “a reasonable tendency to interfere with, restrain, or coerce employees in the exercise of their Section 7 rights” under the National Labor Relations Act (NLRA) can constitute an unfair labor practice—regardless of other employer conduct or external circumstances (e.g., employer motive, employer animus against Section 7 activity, or whether or not the employee accepts the agreement).

McLaren Macomb’s impact was felt immediately, prompting the General Counsel of the NLRB to quickly issue an  explanatory memorandum, Guidance in Response to Inquiries about the McLaren Macomb Decision, Memorandum GC 23-05, which provides further guidance on the decision’s scope and applicability, the role of savings clauses, and other related matters.

McLaren Macomb’s Impact on Employment-Related Agreements

Pre-McLaren Macomb, employers often used standard agreements for separating employees and, naturally, rarely changed certain clauses from one employee to another. Clauses such as non-disparagement and confidentiality clauses—the clauses primarily at issue in McLaren Macomb—were regularly overlooked during a cursory review. In light of McLaren Macomb and the General Counsel’s subsequent guidance, that can no longer be the case. Rather, all employers (and their counsel) should take another look at their standard employment- related agreements.

Looking first to non-disparagement language, a non-disparagement clause can protect companies against statements which are “maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity.” (Memorandum GC 23-05.) This is, of course, far more limited than the typical clauses employers had been using. Per the General Counsel, a non-disparagement clause should be narrowly tailored, justified, and limited to statements from a former employee that would be defamatory. Certainly, they can no longer protect an employer from “bad-mouthing,” as was de riguer in severance and separation agreements in the past.

With respect to confidentiality provisions, which employers regularly used to protect not only company information but also the terms and existence of the agreement itself, the confidentiality clause must be:

  • Narrowly tailored to protect proprietary information and trade secrets;
  • For a limited amount of time; and
  • Based on legitimate business interests.

Confidentiality clauses may include keeping the financial terms confidential. However, these clauses may no longer require the existence of the agreement itself be confidential. In restricting confidentiality clauses in this manner, the Board protects employees from clauses that have a chilling effect that “precludes employees from assisting others about work place issues and/or from communicating with the [NLRB], a union, legal forums, the media, or other third parties.” (Memorandum GC 23-05.)

Employers must also review restrictive covenants, no-poaching clauses, broad liability releases, and covenants not to sue in severance agreements for compliance as well. Interestingly, per the General Counsel, cooperation clauses are another item that may need revision:

some other provisions that are included in some severance agreements might interfere with employees’ exercise of Section 7 rights, such as . . . cooperation requirements involving any current or future investigation or proceeding involving the employer as that affects an employee’s right to refrain under Section 7, such as if the employee was asked to testify against co-workers that the employee assisted with filing a ULP charge.

(Memorandum GC 23-05.) In addition to severance agreements, employers should take a look at offer letters, employee handbooks, and other employee-facing documents where similar clauses might be included.

Importantly, the mere act of providing an agreement that runs afoul of McLaren Macomb may constitute a Section 7 violation regardless of whether the employee actually signs the agreement. The General Counsel writes that the proffer of such an agreement violates the NLRA because “it has a reasonable tendency to interfere with or restrain the prospective exercise of those rights - both by the separating employee and those who remain employed.”

Savings Clauses May Not Save Overbroad Agreements

Employers should also beware of using broad disclaimers or “savings clauses” (e.g., “nothing in this Agreement is intended to restrain your Section 7 rights under the NLRA”) as a failsafe in severance and other employment-related agreements. Again, per the General Counsel, “While specific savings clause or disclaimer language may be useful to resolve ambiguity over vague terms, they would not necessarily cure overly broad provisions. The employer may still be liable for any mixed or inconsistent messages provided to employees that could impede the exercise of Section 7 rights.” Thus, it is unlikely a savings clause will cure an overly broad provision. That said, to date, there hasn’t been a determination on whether a single clause will render an entire agreement void. However, the General Counsel notes that the NLRB will typically invalidate only improper clauses. (GC Memorandum 23-05).

McLaren Macomb’s Impact on Supervisors

The NLRA, of course, typically does not apply to supervisory employees, and thus the majority of McLaren Macomb will not impact agreements between employers and supervisors. However, the General Counsel did note that the NLRA would protect a supervisor who refuses to engage in an unfair labor practice, and is retaliated against or offered an agreement related to the retaliation. Per the General Counsel:

So, not only would it be violative for an employer to retaliate against a supervisor who refuses to proffer an unlawfully overbroad severance agreement, but I believe that an employer who proffers a severance agreement to a supervisor . . . preventing the supervisor from participating in a Board proceeding, could also be unlawful.

(Memorandum GC 23-05.)

Retroactive Application?

An interesting element is the potential retroactive application of McLaren Macomb. The Guidance Memo confirmed that it will be applied to agreements signed prior to the decision. In fact, the Board has already done this as seen in Big Green, (27-CA-283572). In that case, the separation agreements were offered to the employees in September 2021. The Board went on to apply the McLaren Macomb standard and found those agreements in violation of Section 8(a)(1) of the Act. Employers should weigh the benefits and costs of notifying former employees that these clauses are null and void.

McLaren Macomb and the attendant Guidance Memorandum are a return to pre-Trump era precedent. Although this is a change, employers should review employee handbooks and standard agreements regularly. Employers should ensure that the listed clauses are narrowly tailored to the departing employee.

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Francine Bailey Hall

Amundsen Davis

Francine Bailey Hall is Senior Counsel at Amundsen Davis, where she counsels clients on a variety of employment law matters, from analyzing discrimination claims to internal policy matters.