New Rules for Severance Agreements


New Rules for Severance Agreements

What You Need to Know

As an employer, you probably feel like you have a multitude of matters you need to worry about when operating a business and ensuring it runs smoothly.  Sometimes, you need to make tough decisions, such as letting go or terminating employees in your organization.  You may already know that there are certain rules governing employee separation agreements but you should be wary of the recent decision issued by the National Labor Relations Board (“NLRB”) regarding severance agreements.

On February 21, 2023, the NLRB issued a decision in the case McLaren Macomb and held that as an employer, you may not offer individuals severance agreements requiring them to broadly waive their rights under the National Labor Relations Act.  The decision restores longstanding precedent and reverses the recent decision in Baylor University Medical Center and IGT d/b/a International Game Technology, issued in 2020. 

As such, a severance agreement may not include confidentiality clauses and non-disclosure clauses that broadly prohibit the employee being furloughed from making statements that could disparage or harm the image of the employer.  Such clauses and agreements containing a broad proscription of an individual’s right of Section 7 of the National Labor Relations Act have been held unlawful, since they create an enforceable legal obligation to surrender such rights.


This rule is applicable to most private sector employers who fall under the NLRB’s authority.  There are certain groups that are not subject to NLRB’s authority, such as federal, state and local government agencies, railways, airlines, and certain categories of workers excluded under the National Labor Relations Act, among others.

Retroactive Effect

You may be wondering if this decision has a retroactive effect.   However, based on NLRB’s decision, it is not clear, as it does not explicitly state it has a retroactive effect.  However, in general terms, NLRB’s decisions may be considered to have a retroactive effect if someone files a complaint for an alleged labor violation regarding severance agreements within the past six months.

Please note that this blog should be read for informational purposes only.  If you have any questions or require additional information, please contact our office.

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