Introduction: Understanding the McLaren Macomb Decision
On February 21, 2023, the National Labor Relations Board (NLRB) handed down a significant decision in the McLaren Macomb case (372 NLRB No. 58). The ruling established that offering severance agreements with clauses that could reasonably be perceived as restricting employees’ Section 7 rights under the National Labor Relations Act (NLRA) can be considered an unfair labor practice. This holds true even if there is no evidence of malicious employer intent or the employee’s acceptance of the agreement. The decision’s far-reaching effects led the NLRB’s General Counsel to release a follow-up memorandum, Memorandum GC 23-05, to offer additional guidance.
This landmark ruling has reshaped how employers must approach the drafting and offering of employment-related agreements, especially severance contracts. The McLaren Macomb decision affects standard practices regarding non-disparagement, confidentiality, and other clauses that were once commonly included in severance agreements, requiring significant changes in order to comply with the new legal framework.
The Scope of McLaren Macomb’s Influence on Employment Agreements
Prior to McLaren Macomb, employers regularly used standard agreements containing blanket non-disparagement and confidentiality provisions without much scrutiny. These clauses were often crafted to broadly protect the employer’s reputation and confidential information, yet they frequently failed to consider employees’ rights to speak freely about workplace issues. The decision has altered this landscape, compelling employers and their counsel to re-evaluate all standard agreements, including severance agreements, employee handbooks, and offer letters.
Non-Disparagement Clauses: A Shift Toward Narrow Protections
In light of the McLaren Macomb decision, non-disparagement clauses, which previously prohibited employees from speaking negatively about their employer, must now be narrowly tailored. Under the new guidance, these provisions can only restrict statements that are knowingly false or made with reckless disregard for their truth. Broad prohibitions on speaking negatively about the employer are no longer permissible, as these could impede employees’ Section 7 rights. Specifically, such clauses can no longer cover “bad-mouthing” the company in a general sense and must be limited to defamatory statements that are maliciously untrue.
Confidentiality Clauses: Limiting the Scope of Restrictions
Confidentiality provisions have also come under scrutiny post-McLaren Macomb. While employers may still seek to protect proprietary information, trade secrets, and, in some cases, the financial terms of severance agreements, the scope of these protections must now be limited. Confidentiality clauses can no longer require that employees keep the existence of an agreement confidential, as this could discourage employees from discussing workplace issues with colleagues or engaging with third parties such as unions, the media, or the NLRB.
Restrictive Covenants and No-Poaching Clauses
Severance agreements often include restrictive covenants such as non-compete clauses and no-poaching clauses. However, the McLaren Macomb decision has called these provisions into question, particularly if they could be interpreted as restricting an employee’s rights under Section 7. Non-compete and no-poaching clauses that limit employees’ ability to seek new employment or communicate with former colleagues may now be subject to challenge if they interfere with the rights to concerted activity.
Cooperation Clauses and Participation in Investigations
Cooperation clauses, which require employees to assist in future legal or internal investigations, must also be reviewed. The NLRB’s General Counsel has expressed concern that these provisions could interfere with employees’ Section 7 rights, particularly if the employee is asked to testify against co-workers or participate in activities that would conflict with their rights under the NLRA.
Retroactive Application and the Importance of Compliance
One particularly striking aspect of the McLaren Macomb decision is its retroactive application. This means that severance agreements signed before February 21, 2023, may still be subject to challenge if they contain provisions that violate Section 7 of the NLRA. The NLRB has already applied this retroactive standard in cases such as Big Green (27-CA-283572), where it invalidated agreements from 2021 based on the new McLaren Macomb framework.
Employers should weigh the potential benefits and risks of notifying former employees that their severance agreements are no longer enforceable. Taking proactive steps to ensure compliance, such as revising agreements and communicating changes to affected employees, can mitigate the risk of unfair labor practice charges.
Severability and the Fate of Overbroad Agreements
A significant concern among employers is whether the inclusion of a single unlawful provision in a severance agreement renders the entire agreement void. Fortunately, the General Counsel’s memorandum suggests that the NLRB will focus on striking out the offending provisions, rather than invalidating the entire contract, even if there is no severability clause. However, it remains vital for employers to ensure that all provisions within severance agreements are compliant to avoid potential legal challenges.
Supervisors: A Special Case under the NLRA
Supervisory employees are generally excluded from the protections of the NLRA. As such, most of the McLaren Macomb decision does not apply to agreements with supervisors. However, the NLRB’s General Counsel has clarified that there are limited circumstances where supervisors may still be protected. For instance, if a supervisor is retaliated against for refusing to offer an unlawful severance agreement or for declining to participate in an unfair labor practice, the supervisor may have a valid claim under the NLRA.
In such cases, employers must be cautious when drafting agreements for supervisors, particularly when those agreements pertain to participation in NLRB proceedings or related matters.
The Role of Savings Clauses in Mitigating Risk
In the past, many employers included “savings clauses” in their agreements as a way to protect against potential challenges. These clauses typically stated that nothing in the agreement was intended to infringe upon employees’ Section 7 rights. While savings clauses may help clarify ambiguous language, the General Counsel has made it clear that they will not necessarily save an otherwise overly broad provision. Mixed or inconsistent messages within an agreement could still impede employees’ Section 7 rights, even if a savings clause is included.
Employers should not rely solely on savings clauses as a failsafe but should instead focus on ensuring that all agreement provisions are carefully crafted to avoid any potential conflicts with the NLRA.
Expanding Beyond Severance Agreements: Broader Implications of McLaren Macomb
While the McLaren Macomb decision specifically addressed severance agreements, its implications extend to any employer communication that could be seen as infringing on employees’ Section 7 rights. This includes pre-employment documents, offer letters, employee handbooks, and any other agreements that may contain non-compete, non-solicitation, or no-poaching clauses.
Employers must be vigilant in reviewing all employee-facing documents to ensure they comply with the NLRA. Broad liability releases and covenants not to sue are particularly at risk, as these provisions may be interpreted as overly broad if they extend beyond employment-related claims.
Does McLaren Macomb Apply to Settlement Agreements?
The McLaren Macomb decision primarily addressed severance agreements, but its implications extend beyond just these types of contracts. According to the NLRB’s General Counsel, the principles outlined in McLaren Macomb may also apply to settlement agreements and other employment-related contracts. If provisions in these agreements, such as confidentiality or non-disparagement clauses, are overly broad and could potentially infringe upon employees’ Section 7 rights, they may be considered unlawful under the National Labor Relations Act (NLRA).
The key issue is whether the terms of any agreement, including settlement agreements, might restrict employees from engaging in protected concerted activities, such as discussing workplace issues with co-workers, unions, or government agencies. Just as severance agreements must avoid overly restrictive clauses that prevent employees from exercising their rights under the NLRA, the same logic applies to settlement agreements. Broad non-disparagement or confidentiality clauses that have a “chilling effect” on employees’ ability to communicate about workplace conditions or assist others may be deemed unlawful.
Employers need to be cautious when drafting settlement agreements to ensure compliance with McLaren Macomb. Even though settlement agreements may not traditionally be seen as part of the same category as severance agreements, the General Counsel has made it clear that any employer communication that potentially infringes on employee rights could fall under similar scrutiny. Therefore, employers should review all employment-related agreements to ensure they do not inadvertently violate Section 7 rights.
Does the McLaren Macomb Decision Apply to Managers?
The McLaren Macomb decision primarily impacts non-managerial employees, as the protections under the National Labor Relations Act (NLRA) do not typically extend to supervisors or managerial employees. Managers are generally excluded from the definition of “employee” under the NLRA, meaning the McLaren Macomb ruling, which emphasizes protecting employees’ Section 7 rights, does not apply directly to them in most cases.
However, there are specific circumstances where the McLaren decision could indirectly affect managers. The NLRB’s General Counsel has clarified that managers and supervisors may be protected if they refuse to engage in activities that would violate the NLRA. For instance, if a manager is asked to offer an unlawful severance agreement or is retaliated against for refusing to participate in an unfair labor practice, they may be entitled to some protections under the NLRA.
Additionally, the proffering of severance agreements to managers with clauses that attempt to restrict participation in NLRB proceedings or prevent them from assisting non-supervisory employees in exercising their Section 7 rights could be considered unlawful. In such cases, even though managers are not covered by the NLRA in the same way as rank-and-file employees, certain protections may still apply when the agreement relates to potentially unfair labor practices.
Employers should therefore exercise caution when drafting severance or settlement agreements for managers, ensuring that they do not contain provisions that could be interpreted as violating the NLRA’s principles or restricting managers’ lawful rights in relation to unfair labor practices.
Does McLaren Macomb Apply to Non-Union Employees?
Yes, the McLaren Macomb decision does apply to non-union employees. The National Labor Relations Act (NLRA), under which the McLaren Macomb ruling was made, protects both unionized and non-unionized employees. Specifically, Section 7 of the NLRA grants employees the right to engage in “concerted activities” for their mutual aid or protection, which includes discussing workplace conditions, wages, and other employment-related matters, regardless of union affiliation.
The McLaren Macomb decision emphasizes that provisions in severance agreements, such as broad non-disparagement or confidentiality clauses, that could restrict employees from exercising these Section 7 rights are unlawful. This means that even non-union employees must be allowed to discuss workplace issues freely with their co-workers, government agencies, or third parties like the media.
In essence, non-union employees are entitled to the same protections against overly restrictive severance agreements as their unionized counterparts. Employers offering severance agreements to non-union employees must ensure that the terms do not infringe upon their rights to engage in concerted activities, as outlined by the NLRA. This applies to all forms of employment-related agreements, making it essential for employers to review and revise their agreements accordingly, whether they deal with union or non-union employees.
Voluntary Notices to Employees: A Risk Mitigation Strategy
One potential way for employers to mitigate risk in the wake of McLaren Macomb is to issue voluntary notices to employees. These notices could inform employees that any overly broad provisions in their agreements are null and void and that the employer will not seek to enforce them. The General Counsel has suggested that this type of preemptive action could help shield employers from future unfair labor practice charges, although it does not guarantee immunity from all legal challenges.
Employers should carefully assess their risk tolerance before deciding whether to take this step. In some cases, issuing voluntary notices may be seen as an admission of wrongdoing, which could invite further scrutiny.
Key Takeaways for Employers Post-McLaren Macomb
The McLaren Macomb decision marks a return to a more employee-friendly interpretation of the NLRA, undoing much of the precedent set during the Trump administration. As a result, employers must be proactive in reviewing and updating their agreements and policies to ensure compliance with the new legal landscape.
- Review and Revise Agreements: Employers should review severance, settlement, and other employment-related agreements to ensure that provisions are narrowly tailored and compliant with Section 7 of the NLRA.
- Consider Retroactive Changes: Employers should evaluate whether to notify former employees that their agreements are no longer enforceable, particularly if they were signed before the McLaren Macomb decision.
- Stay Informed: The NLRB’s General Counsel has indicated that more changes may be on the horizon, particularly regarding non-compete, non-solicitation, and no-poaching clauses.
- Implement Risk Mitigation Strategies: Employers should consider whether issuing voluntary notices to employees is an appropriate step for mitigating the risk of future legal challenges.
In conclusion, McLaren Macomb has set a new standard for how employers must approach severance and other employment-related agreements. By staying informed and taking proactive steps to comply with the NLRA, employers can minimize the risk of unfair labor practice charges and ensure that their agreements are both lawful and effective.
