Hunton Employment & Labor Perspectives

The Consumer Financial Protection Bureau (the “CFPB”) has added itself to the list of agencies that view broad confidentiality agreements given to employees with scepticism. In a Circular published on July 24, 2024, the CFPB stated that requiring employees to sign a broad confidentiality agreement could violate Section 1057 of the Consumer Financial Protection Act (the “CFPA").

The Fourth Circuit issued an opinion in Messer et al. v. Bristol Compressors International, LLC et. al. that should serve as a cautionary tale to employers planning to use severance agreements when implementing layoffs.  There, the court considered three questions.  First, whether Bristol Compressors validly eliminated its severance plan before terminating Plaintiffs’ employment.  Second, whether certain Plaintiffs who signed a Stay Bonus Letter Agreement (“SBLA”) waived their claims against Bristol Compressors.  And third, whether four of the Plaintiffs received adequate notice under the WARN Act before their employment was terminated.

On March 22, 2023, the General Counsel of the National Labor Relations Board (NLRB or the “Board”), Jennifer Abruzzo, issued a memorandum providing guidance in light of the NLRB’s recent decision in McLaren Macomb, 372 NLRB No. 58 (2023). As previously reported, the Board in McLaren Macomb held that overly broad non-disclosure and non-disparagement provisions in severance agreements violate employee rights under the National Labor Relations Act (NLRA or the “Act”). The General Counsel’s memorandum—which is directed to the Board’s regional offices over which she exercises supervisory authority—seeks to clarify the scope of the McLaren Macomb decision, including: the types of provisions that may violate the NLRA; language that may be acceptable in light of the decision; whether the decision applies retroactively to previously executed severance agreements; and the potential applicability of the decision to supervisors. The memorandum is not legally binding, but it does give employers a more informed roadmap for how the Board initially will handle unfair labor practice (“ULP”) charges challenging severance agreements.

The National Labor Relations Board (“Board” or NLRB) decided in McLaren Macomb, 372 NLRB No. 58 (2023) that an employer violated the National Labor Relations Act (NLRA) by offering furloughed employees severance agreements that contained confidentiality and non-disparagement provisions. “A severance agreement is unlawful if its terms have a reasonable tendency to interfere with, restrain, or coerce employees in the exercise of their [NLRA] rights, and that employers’ proffer of such agreements to employees is unlawful,” announced the Board. In rendering the decision, the NLRB overruled Baylor Univ. Med. Ctr., 369 NLRB No. 43 (2020)[1] and IGT d/b/a Int’l Game Tech., 370 NLRB No. 50 (2020). In those cases, the Board decided that employers did not independently violate the NLRA simply by presenting employees with severance agreements containing non-assistance, non-disclosure, and non-disparagement provisions that arguably restricted NLRA rights absent some additional circumstances.