The National Labor Relations Board (the “Board”) recently issued a decision that has profound impacts on the validity of confidentiality and non-disparagement clauses in employment contracts, McLaren Macomb et al, Case 07-CA-263041. The case involved an employer that offered severance agreements to some employees it had permanently laid off. The severance agreement, which conditioned payment of a monetary severance upon the employee’s signing of the agreement, contained among other things, a confidentiality clause and a non-disparagement clause. The language of the clauses at issue was as follows:
Confidentiality Agreement: The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.
Non-Disclosure: At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of the Employer, its parent and affiliated entities and their officers, directors, employees, agents, and representatives.
In reviewing the two clauses against the protections of the National Labor Relations Act (“NLRA”), the Board held that both clauses were unlawful for causing chilling tendencies on employees’ rights, namely the employees’ rights to discuss terms and conditions of employment with co-workers and their rights to critique the employer and discuss ongoing labor disputes. After finding the clauses unlawful, the Board went on to rule that merely offering an agreement containing these clauses constituted an unlawful interference with employees’ statutory rights and that the agreement becomes void as a whole because of the invalid clauses.
The Board’s ruling in McLaren is bound to have significant reach on the viability of similar confidentiality and non-disparagement clauses in any employment contract, not just severance agreements. Further, despite the common conception that the NLRA applies only when there is an employee union, the NLRA has a far reach and applies in employment settings even when there is no unionization present. As such, an employer offering employment or severance contracts containing confidentiality or non-disparagement clauses should proceed with caution in light of this new ruling.
To employers, we recommend that you have counsel review your current employment contracts and severance agreements for revisions in line with the new NLRB ruling. At OVB Law & Consulting, S.C., our experienced employment attorneys can offer clients valuable insight into the applicability of the NLRA to your current agreements, and draft and propose revisions to your current contracts to best reduce the possibility that you end up like the employer in McLaren (who ended up being ordered to reinstate all the furloughed employees and compensate them for the lost wages and other damages incurred). Call us today to set up an appointment.
