Free to Speak: Are Non-Disparagement Provisions Enforceable?

by Colleen Brugger, Associate Member, University of Cincinnati Law Review Vol. 91

I. Introduction

In early 2023, the National Labor Relations Board (“NLRB”) issued the McLaren Macomb decision declaring that overly broad non-disparagement provisions in employee severance agreements are unenforceable as an unfair labor practice.¹ Non-disparagement provisions greatly limit a former employee’s speech upon their departure from an employer—regardless of the circumstances surrounding the departure.² Unfair labor practices occur when the employer interferes with some form of collective employee action.³ In the wake of the NLRB action, employees have more freedom to speak, on more platforms, without losing their severance.⁴

This article examines the evolution and current legality of non-disparagement provisions according to the NLRB. Specifically, the article details how the scope of enforceable non-disparagement provisions has changed with McLaren Macomb. Part II provides background on the definition and function of non-disparagement provisions. Further, Part II establishes the NLRB’s historical view of non-disparagement provisions and their classification as an unfair labor practice. Part III discusses how the NLRB’s recent decision in McLaren Macomb balances the needs of employers and employees in a modern workplace. Finally, Part IV concludes by recommending a cautious approach to both employers and employees when it comes to non-disparagement provisions.

II. Background

In the face of changing standards, former employees have more freedom to speak to the general public. The National Labor Relations Act (“NLRA”) targets unfair labor practices and founded the NLRB to investigate them.⁵ The purpose of the NLRA was to place employees on equal footing with their employers.⁶ This is done under Sections 7 and 8 of the NLRA, which gives a broad definition of unfair labor practices.⁷

A. NLRA Section 7

The NLRB is concerned with non-disparagement clauses because unscrupulous employers–employees use non-disparagement provisions as a smokescreen, not only to hide behavior contrary to the NLRA, but to deter employee action under the NLRA.⁸ Section 7 states:

Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all of such activities…⁹

Accordingly, protected employee behavior under Section 7 can be union-related, safety-related, or some form of collective action.¹⁰ However, when the NLRB finds a violation of Section 7 rights, the NLRB will also refer to it as a Section 8 violation.¹¹ This is because Section 7 defines an unfair labor action and Section 8 provides a cause of action.¹²

B. Non-disparagement

Non-disparagement provisions are common clauses in severance agreements.¹³ These provisions are either a few words within a confidentiality clause or are independent provisions within the agreement.¹⁴ Severance agreements are contracts between an employer and employee upon an employee’s departure from a company in which the company pays the employee a small continuation of their salary in exchange for compliance with the agreement’s terms.¹⁵ When non-disparagement clauses are included in these agreements, they require the former employees to keep all negative experiences and comments to themselves.¹⁶

However, these provisions enable unscrupulous employers to avoid accountability—which is the NLRB’s concern.¹⁷ Especially with broad provisions, an employee would prefer to stay silent than have the former employer take back the severance payment.¹⁸ An example of one such broad non-disparagement provision can be found in McLaren Macomb:

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 Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.¹⁹

This provision forbids the employee from speaking freely to any third-party except a marriage partner.²⁰

Facially, non-disparagement provisions protect a company’s legitimate interest in a positive reputation.²¹ However, non-disparagement provisions may limit more than commentary on a former employer’s business practices and/or products.²² Broad non-disparagement clauses can prohibit employee to employee communication, former employee comments on social media, and chill employee to government communication.²³ The above provision further illustrates the chilling impact non-disparagement provisions can have.²⁴ Employee to employee communication covers a broad span of topics from salary, to benefits, to treatment by supervisory employees.²⁵ Banning this type of communication triggers Section 7 liability because employees sharing this information, especially treatment by supervisory employees, can be characterized as collective action for “mutual aid.”²⁶ Without non-disparagement clauses, the employee, though terminated, can still act to improve the workplace for current employees by sharing their experiences publicly.²⁷

C. NLRB and Non-Disparagement Provisions

Throughout the NLRB’s history, the Board has attempted to balance both the interest of employers and employees in discussions about past employment.²⁸ Which party’s interest has predominated within the NLRB has fluctuated over the course of the twenty-first century.²⁹

1. Clark Distribution Systems – the Initial Stance

The NLRB began with the position that non-disparagement provisions, which prohibited cooperation with the NLRB or the employee’s former coworkers, in exchange for severance were not enforceable.³⁰ Following a failed attempt at unionization, Clark Distribution Systems (“Clark”) decided to downsize its workforce.³¹ In an effort to do so without strife, Clark offered severance packages to induce employees to resign.³² The severance package included the following provision with both confidentiality and non-disparagement language: “[employee] further agree[s] that [employee] will not . . . voluntarily appear as a witness, voluntarily provide documents or information, or otherwise assist in the prosecution of any claims . . . against the company.³³ A NLRB agent investigating Clark contacted an employee who had taken the severance.³⁴ This employee refused to cooperate with the NLRB for fear of losing their severance package.³⁵ The NLRB found that by prohibiting the former employee from aiding current Clark employees, Clark had drafted a coercive, unenforceable non-disparagement and confidentiality provision.³⁶ The mere frustration of collective employee action, between current and former Clark employees, was enough to nullify the non-disparagement provision.

2. The 2020 Disruption

Clark Distribution Systems and other NLRB decisions like it were the ruling precedent on non-disparagement provisions until three years ago.³⁷ In 2020, the NLRB decided two cases that made non-disparagement provisions enforceable when the agreements that contained them were not mandatory and were signed voluntarily³⁸ As the NLRB held in Baylor University Medical Center and IGT d/b/a International Game Technology, the agreements were not fundamental to the conditions or rules of employment which Section 7 protects.³⁹ In each instance, the NLRB overturned the decision of an administrative judge who had initially decided the case.⁴⁰ The provisions at issue were stark limits on employee speech, with one stating “[employee] will not disparage or discredit [employer] or any of its affiliates, officers, directors and employees. You will forfeit any right to receive the payments or benefits described in Section 3 if you engage in deliberate conduct or make any public statements detrimental to the business or reputation of [employer].”⁴¹ However, in a dissent, a Board member described the departure from Clark Distribution Systems and decisions like it as troubling due to their coercive impact on the signing employee.⁴² But, in each of the decisions, the NLRB highlighted the underlying possible Section 7 violations in decisions like Clark to distinguish them from the non-disparagement provisions the Board enforced.⁴³

3. McLaren Macomb – the Present Stance

This year, the NLRB reverted to a position similar to the holding of Clark on non-disparagement provisions.⁴⁴ Affirming the administrative judge, who invalidated the provision despite the decisions in 2020, the NLRB held that broad non-disparagement provisions are not enforceable⁴⁵ In McLaren Macomb, a hospital offered severance to multiple employees when it furloughed, then terminated them.⁴⁶ The severance package offered to the employees “precludes [them] from assisting coworkers with workplace issues concerning their employer, and from communicating with others, including a union, and the Board, about [their] employment.”⁴⁷ The non-disparagement provision stated “[a]t 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 Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.” ⁴⁸ The provision severely curtailed any exercise or potential exercise of the employees’ Section 7 rights–as employees could not collectively act with, or without, the union to improve the workplace.⁴⁹

The above non-disparagement provision was not limited to commentary on the employer-employee relationship⁵⁰ The NLRB hoped that banning this type of non-disparagement clause would open communication to third parties—such as social media parties—removing the chilling effect of the provision⁵¹ Not only does the decision greatly reduce the number of enforceable non-disparagement provisions, but it has retroactive application as well.⁵² McLaren Macomb expands the network of resources employees have, as they may speak about their employment experiences free from broad non-disparagement provisions.⁵³.

III. Discussion

McLaren Macomb has changed the enforceability of non-disparagement provisions in severance agreements.⁵⁴ Under the NLRB’s previous scheme, almost all non-disparagement provisions would have been enforced.⁵⁵ Throughout the twenty-first century, only the NLRB’s position has changed—not the provisions. This has made employee decisions to speak and employer decisions to pursue breaches relatively high-risk. However, in McLaren Macomb, the NLRB struck the perfect balance between Section 7 rights and employer interests.

In McLaren Macomb, the non-disparagement provision did not vary significantly from any of the other above-analyzed NLRB decisions.⁵⁶ Each provision includes broad language—proscribing public commentary in some form—whether it is to governmental parties⁵⁷ or third parties generally.⁵⁸ This broad language has allowed the scope of the provisions to grow over the past twenty years. The increase in scope, in part, responds to the advent and growth of social media. As social media grew, the potential rose for employees to misstep and make “public statements detrimental to the business or reputation of [employer].”⁵⁹ also grew.

McLaren Macomb’s expulsion of boilerplate non-disparagement clauses benefits both employers and employees. By continuing to speak to their former co-workers or share experiences on social media, employees can cooperate to create a better workplace in the future.⁶⁰ Section 7 rights are designed to protect the exercise of First Amendment Rights targeted at improving the workplace from interference from all employers.⁶¹

However, as McLaren Macomb was limited to overly broad non-disparagement provisions, employers are not helpless against harmful claims. Employers will still be able to protect their reputations. So long as a non-disparagement clause is carefully drafted,⁶² it should protect against “malicious or false statements that disparage”⁶³ made by former employees. The only true restriction imposed by McLaren Macomb is that employers should not expect a silent workforce.

IV. Conclusion

The NLRB’s recent decision in McLaren Macomb advances employees’ Section 7 rights into the modern age. McLaren Macomb respects employers’ need to respond to certain attacks on their reputations by encouraging targeted and careful drafting of non-disparagement provisions. Simultaneously, McLaren Macomb enables employees to freely communicate with the government, third parties, and amongst themselves in the pursuit of a better workplace. However, as certain types of non-disparagement provisions are still in effect after McLaren Macomb, employers and employees should take a careful look at their agreements before speaking.

Cover Photo by Christina on Unsplash

Colleen Brugger

Colleen Brugger is a Cincinnati native who is looking forward to exploring the various law topics this year. When she is not working towards her law degree, Colleen enjoys exploring the city and a good book.

References

1
McLaren Macomb, 372 N.L.R.B. No. 58 at 1 (2023).
2
Tonia Hap Murphy, Nondisparagement Clauses in Severance Agreements: A Capstone Contracts Exercise, 34 J. LEGAL Stud. Educ. 1, 5- 7 (2017).
3
29 U.S.C.S. § 157 (2022).
4
See McLaren Macomb, 372 N.L.R.B No. 58 at 6.
5
29 U.S.C.S. §§ 151, 157-158 (2022); The NLRB Process, N.L.R.B, https://www.nlrb.gov/resources/nlrb-process (last visited Mar. 31, 2023).
6
Lori A. Ciarrocca, The Struggle to Define Section 7 Concerted Activity: A Literal Definition Emerges, 44 Wash. & Lee L. Rev. 1277, 1278 (1987).
7
See 29 U.S.C.S. §§ 157-158 (2022).
8
See generally 29 U.S.C.S. §§ 151-158 (2022).
9
9 U.S.C.S. § 157 (2022).
10
See generally Ciarrocca, supra note 4.
11
McLaren Macomb, 372 N.L.R.B No. 58 at 1.
12
29 U.S.C.S. § 157 (2022).
13
Murphy, supra note 2 at 6.
14
Clark Distribution Systems, Inc., 336 N.L.R.B No. 60 at 748 (2001); McLaren Macomb, 372 N.L.R.B. No. 58 at 2 (2023).
15
Murphy, supra note 2 at 10.
16
Amber Scorah & Riella Steinhorn, Laid-Off Workers are Calling Out Their Former Employers on Social Media–And The Death Of Non-Disparagement Clauses Could Make It the Norm, FORTUNE (Mar. 23, 2023), https://fortune.com/2023/03/23/laid-off-workers-calling-out-former-employers-social-media-non-disparagement-clauses-rule-careers-labor-steinhorn-scorah/.
17
Id.
18
Id.
19
McLaren Macomb, 372 N.L.R.B. No. 58 at 2 (emphasis in original).
20
Id.
21
See Murphy, supra note 2 at 12-13.
22
See McLaren Macomb, 372 N.L.R.B No. 58 at 2.
23
Scorah & Steinhorn, supra note 16; McLaren Macomb, 372 N.L.R.B. No. 58 at 6; Clark Distribution Systems, Inc., 336 N.L.R.B. No. 60 at 748 (2001).
24
Id. at 5.
25
See Scorah & Steinhorn, supra note 23.
26
29 U.S.C.S. § 157 (2022).
27
Scorah & Steinhorn, supra note 23.
28
Clark Distribution Systems, Inc., 336 N.L.R.B. No. 60; Baylor University Medical Center, 369 N.L.R.B. No. 43 (2020); IGT d/b/a International Game Technology, 370 N.L.R.B. No. 50 (2020); McLaren Macomb, 372 N.L.R.B. No. 58 at 7-8.
29
Id.
30
Clark Distribution Systems, Inc., 336 N.L.R.B. No. 60 at 747.
31
Id.
32
Id.
33
Id. at 748 (emphasis added).
34
Id.
35
Id.
36
Id.
37
Baylor University Medical Center, 369 N.L.R.B. No. 43 at 2.
38
Id. at 1.
39
IGT d/b/a International Game Technology, 370 N.L.R.B. No. 50 at 2.
40
Baylor University Medical Center, 369 N.L.R.B. No. 43 at 1; IGT d/b/a International Game Technology, 370 N.L.R.B. No. 50 at 1.
41
IGT d/b/a International Game Technology, 370 N.L.R.B. No. 50 at 7; Baylor University Medical Center, 369 N.L.R.B. No. 43 at 1 (“agrees that [he or] she must . . . keep secret and confidential and not . . . utilize in any manner all . . . confidential information of [Baylor] or any of the Released Parties made available to [the signatory] during [his or] her . . . employment, . . . including . . . information concerning operations, finances, . . . employees, . . . personnel lists; financial and other personal information regarding . . . employees”).
42
IGT d/b/a International Game Technology, 370 N.L.R.B. No. 50 at 4 (Member McFerran, dissenting).
43
Baylor University Medical Center, 369 N.L.R.B. No. 43 at 2; see Clark Distribution Systems, Inc., 336 N.L.R.B. No. 603 at 749.
44
See McLaren Macomb, 369 N.L.R.B. No. 43 at 1.
45
Id. at 9.
46
Id. at 1.
47
Id. at 9.
48
Id. at 2.
49
Id.
50
Id. at 8.
51
Id. at 8, 6.
52
Maxwell Scrachan, Non-Disparagement Clauses Are Retroactively Voided, NLRB’s Top Cop Clarifies, VICE (Mar. 24, 2023), https://www.vice.com/en/article/n7ewy7/non-disparagement-clauses-are-retroactively-voided-nlrbs-top-cop-clarifies?utm_medium=social+&utm_source=VICE_Twitter.
53
McLaren Macomb, 369 N.L.R.B. No. 43 at 1, 6.
54
Id. at 1.
55
Baylor University Medical Center, 369 N.L.R.B. No. 43 at 2; IGT d/b/a International Game Technology, 370 N.L.R.B. No. 50 at 2.
56
McLaren Macomb, 369 N.L.R.B. No. 43 at 2 (“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 Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.”).
57
Clark Distribution Systems, Inc., 336 N.L.R.B. No. 603at 748 (“[employee] further agree[s] that [employee] will not . . . voluntarily appear as a witness, voluntarily provide documents or information, or otherwise assist in the prosecution of any claims . . . against the [employer]”).
58
IGT d/b/a International Game Technology, 370 N.L.R.B. No. 50 at 7 (“[employee] will not disparage or discredit [employer] or any of its affiliates, officers, directors and employees. You will forfeit any right to receive the payments or benefits described in Section 3 if you engage in deliberate conduct or make any public statements detrimental to the business or reputation of [employer].); Baylor University Medical Center, 369 N.L.R.B. No. 43 at 1 (“agrees that [he or] she must . . . keep secret and confidential and not . . . utilize in any manner all . . . confidential information of [Baylor] or any of the Released Parties made available to [the signatory] during [his or] her . . . employment, . . . including . . . information concerning operations, finances, . . . employees, . . . personnel lists; financial and other personal information regarding . . . employees”).
59
IGT d/b/a International Game Technology, 370 N.L.R.B. No. 50 at 7.
60
See McLaren Macomb, 369 N.L.R.B. No. 43 at 6.[/mfn/] While the facts of McLaren Macomb may shift employee concern from former employer retaliation to prospective employers’ perception of an alleged ‘trouble-maker,’ their actions are likely still protected.⁶⁰ See Josie Cox, Why Some US Workers May Never Speak Out Against Employers, BBC (Mar. 16, 2023), https://www.bbc.com/worklife/article/20230316-why-some-us-workers-may-never-speak-out-against-employers.
61
See 29 U.S.C.S. § 157 (2022). Especially as McLaren Macomb itself enforced such rights after the termination of an employment agreement and the NLRB has penalized employers for failure to hire union activists. See McLaren Macomb, 369 N.L.R.B. No. 43; Fluor Daniel, Inc. v. N.L.R.B., 332 F.3d 961, 972 (6th Cir. 2003)(hiring policy was pretextual discrimination against union activists). An analogous claim could be made in a case of failure to hire due to the exercise of section 7 rights to improve a former workplace.
62
Scrachan, supra note 52.
63
IGT d/b/a International Game Technology, 370 N.L.R.B. No. 50 at 1.