Confidentiality and Non-Disparagement Clauses in California: An Update

In late March, the National Labor Relations Board (NLRB) General Counsel issued a memo about the McLaren Macomb decision. This memo (and the court case) impact confidential and non-disparagement clauses in severance agreements.   

The McLaren Macomb Decision (in brief) 

In McLaren Macomb, the NLRB considered a severance agreement that contained overly broad non-disparagement and confidentiality clauses. The agreement also outlined penalties for breaching these provisions, which included both monetary and injunctive sanctions.  

The Non-Disparagement Clause 

The non-disparagement clause at issue “advised the employees that they are prohibited from making statements that could disparage or harm the image of the employer, its parent and affiliates, and their officers, directors, employees, agents, and representatives.”  

The Confidentiality Clause 

The confidentiality clause prohibited employees from “disclosing the terms of the agreement to anyone, except for a spouse or professional advisor, unless compelled by law to do so.”  

The McLaren Decision 

The NLRB decided that employees may not broadly waive their rights under the Act and that any agreements that attempt to restrict employees from engaging in protected activities are unlawful.  

The NLRB’s March 2023 Memorandum 

The NLRB’s General Counsel published answers to some common inquiries in its March 2023 memorandum. We’ve summarized the information contained in the Q&A portion of the memorandum below:  

• Severance agreements are not banned, but they may not contain overly broad provisions that restrict the rights of employees to engage with one another.  
• This decision invalidates unlawful agreements entered prior to the Board’s decision on February 21, 2023.  
• The decision impacts all employer communications containing overly broad confidentiality and/or non-disparagement clauses – including pre-employment and offer letters.  
• Generally, only the unlawful provisions are struck out of an agreement. However, the NLRB will consider each case on its facts.  
• Overly broad confidentiality and non-disparagement clauses would be unlawful even if the employee requests them. 
• Narrow confidentiality clauses, such as those that restrict the sharing of proprietary or trade secret information for a period of time may be lawful – so long as the employer can show a legitimate business reason for the restriction.  
• Employers may restrict employees from making defamatory statements through non-disparagement clauses.  
• Employers cannot retaliate against supervisors who do not sign agreements containing overly broad confidentiality and/or non-disparagement clauses.  
• Former employees are entitled to the same protections under the Act as current employees.  
• Surrounding circumstances are not relevant to the NLRB when it considers if a provision is facially lawful.  
• Whether an employee chooses to sign an unlawful severance agreement is not relevant, since their decision to sign or not sign does not change whether the employer’s conduct was lawful.  

Finally, the NLRB General Counsel also outlined some other clauses that they consider may be problematic following the McLaren decision, including:  

• Non-compete clauses. 
• No solicitation clauses. 
• No poaching clauses. 
• Broad liability releases and covenants not to sue. 
• Cooperation requirements.  

Key Takeaways for Employers 

We have three key takeaways for employers:  

1. Seek advice before attempting to enforce broad agreements that were made previously. As we outlined above, McLaren does apply retroactively. Consider remedying past agreements by notifying employees subject to such severance agreements that the provisions at issue are void and will not be enforced against them. 
2. Limit your confidentiality and non-disparagement clauses in all your employee communications.  
3. You may wish to review your agreements with your legal counsel to determine whether any of the ‘problematic’ provisions above may be considered unlawful.  

Reach out for assistance. Our employment attorneys would love to help.

• Employment Law