Navigating the McLaren Macomb Ruling: A New Era in Severance Agreements and the Impact on Employers and Employees

Severance agreements are often used by employers to ensure a smooth transition for employees who are leaving the company. These agreements typically include confidentiality and non-disparagement clauses that prohibit the employee from speaking negatively about the company or revealing confidential information. However, a recent decision by the National Labor Relations Board (NLRB) has paved the way for employees to challenge the legality of these clauses.

Background on severance agreements and their use of non-disparagement and confidentiality provisions

Employers often offer severance agreements to departing employees to minimize the risk of litigation and protect their trade secrets and intellectual property. These agreements typically include non-disparagement and confidentiality provisions that prohibit the employee from speaking negatively about the company or revealing confidential information.

These clauses are designed to protect the company’s reputation and trade secrets, but they have been criticized for their chilling effect on employee speech. Employees may be reluctant to speak out about issues of concern if they fear retaliation or if their severance payments are contingent upon their silence.

McLaren decision and its impact on severance agreements

In February 2021, the NLRB issued a decision in the case of Raytheon Technologies Corp. and United Steelworkers, Local 12012, AFL-CIO, stating that conditioning severance agreements on the acceptance of non-disparagement and confidentiality terms is unlawful.

According to the Board, these clauses “interfere with employees’ Section 7 rights to engage in concerted activity for mutual aid or protection by limiting the information about the employer that the employee can share with others.” The Board also found that these clauses have a chilling effect on employees’ willingness to engage in protected activity.

Guidance for Employers on How to Comply with the McLaren Decision

The NLRB has provided guidance for employers on how to comply with the McLaren decision. Employers must review both their current and future severance agreements, as well as any agreements that could be deemed to infringe upon employees’ Section 7 rights.

The board will attempt to strike overbroad, violative provisions of severance agreements instead of invalidating entire agreements. Narrowly tailored confidentiality and non-disparagement provisions may still be considered lawful, but employers should ensure that they do not have a chilling effect on employee speech.

The NLRB is considering the potential extension of the McLaren decision to include severance agreements issued to supervisors under certain circumstances. If a supervisor is also an employee who engages in protected activity, their severance agreement may be subject to the same scrutiny as those agreements of non-supervisory employees.

The McLaren decision has a retroactive effect, so “maintaining and/or enforcing a previously entered severance agreement with unlawful provisions” will be considered a continuous violation and will, therefore, not be time-barred. Employers may be liable for violating the NLRA even if the agreement was signed before the McLaren decision.

Remedies for overbroad or violative provisions in severance agreements

The board will attempt to sever any overbroad or violative provisions in severance agreements instead of invalidating the entire agreement. Employers may be required to revise their severance agreements to remove any offending provisions.

Exceptions for narrowly tailored confidentiality and non-disparagement provisions

Narrowly tailored confidentiality and non-disparagement provisions may still be considered lawful. Employers should ensure that these clauses do not have a chilling effect on employee speech and that they are narrowly tailored to only protect the company’s legitimate business interests.

Discussion of protected activity under the NLRA, including conversations about race and racism:
The NLRB has also clarified that discussions about race and conversations regarding racism could be considered “concerted protected activity” under the NLRA. If an employee’s severance agreement prohibits them from discussing these issues, it may be deemed unlawful.

It is crucially important for employers to consider whether an employee has engaged in any protected activity before taking adverse action against them. This includes all employment laws, including the NLRA. If employers take adverse action based on protected activity, they may be held liable for violating employee rights.

The NLRB’s decision in McLaren carries significant implications for employers who frequently enter into severance agreements containing broad confidentiality and non-disparagement clauses. Employers must review their existing and future agreements in light of this decision and ensure that they do not impede employees’ Section 7 rights. The guidance provided by the Board offers employers a framework to comply with the ruling and minimize their liability.

Explore more

Robotic Process Automation Software – Review

In an era of digital transformation, businesses are constantly striving to enhance operational efficiency. A staggering amount of time is spent on repetitive tasks that can often distract employees from more strategic work. Enter Robotic Process Automation (RPA), a technology that has revolutionized the way companies handle mundane activities. RPA software automates routine processes, freeing human workers to focus on

RPA Revolutionizes Banking With Efficiency and Cost Reductions

In today’s fast-paced financial world, how can banks maintain both precision and velocity without succumbing to human error? A striking statistic reveals manual errors cost the financial sector billions each year. Daily banking operations—from processing transactions to compliance checks—are riddled with risks of inaccuracies. It is within this context that banks are looking toward a solution that promises not just

Europe’s 5G Deployment: Regional Disparities and Policy Impacts

The landscape of 5G deployment in Europe is marked by notable regional disparities, with Northern and Southern parts of the continent surging ahead while Western and Eastern regions struggle to keep pace. Northern countries like Denmark and Sweden, along with Southern nations such as Greece, are at the forefront, boasting some of the highest 5G coverage percentages. In contrast, Western

Leadership Mindset for Sustainable DevOps Cost Optimization

Introducing Dominic Jainy, a notable expert in IT with a comprehensive background in artificial intelligence, machine learning, and blockchain technologies. Jainy is dedicated to optimizing the utilization of these groundbreaking technologies across various industries, focusing particularly on sustainable DevOps cost optimization and leadership in technology management. In this insightful discussion, Jainy delves into the pivotal leadership strategies and mindset shifts

AI in DevOps – Review

In the fast-paced world of technology, the convergence of artificial intelligence (AI) and DevOps marks a pivotal shift in how software development and IT operations are managed. As enterprises increasingly seek efficiency and agility, AI is emerging as a crucial component in DevOps practices, offering automation and predictive capabilities that drastically alter traditional workflows. This review delves into the transformative