Protecting The Rights Of Employees and Workers
Challenging Broad Employer Severance Provisions
NLRB Says Broad Confidentiality or Non-Disparagement Provisions in Severance Agreements Not Enforceable
The National Labor Relations Board (NLRB) is an independent federal agency that protects employees’ rights in the workplace vis-à-vis employers, unions, and other employees. One of the NLRB’s main priorities is the enforcement of the National Labor Relations Act (NLRA), which—among other things—guarantees private-sector employees the right to organize into trade unions and be free from unfair labor practices. While the NLRB is often focused on unions and employers’ interference with attempts to unionize, the NLRA, and many NLRB decisions, apply to all employees, including non-unionized ones.
On February 21, 2023, the NLRB issued such a decision—McLaren Macomb, 372 NLRB No. 58. McLaren Macomb substantially restricts employers’ ability to execute (or even offer) confidentiality and non-disparagement provisions in severance agreements. In the decision, the NLRB ruled that language that forbids employees to communicate with others about their severance arrangement or about the company unlawfully forces employees to waive their rights under Section 7 of the NLRA. (Rights under Section 7 include, for example, the right of employees to self-organize, to bargain collectively through representatives of their choosing, and to engage in other concerted activities.)
Consequently, it is now unlawful under Section 8(a)(1) of the NLRA for employers to even offer severance agreements with such language. Offering such agreements, the NLRB held, could impermissibly deter employees from exercising their Section 7 rights because employees would likely feel coerced to give up their rights in order to receive the benefits provided in the agreement.
Chairman Lauren McFerran explained that it has “long been understood by the Board and the courts that employers cannot ask individual employees to choose between receiving benefits and exercising their rights under the National Labor Relations Act. Today’s decision upholds this important principle and restores long standing precedent.”
This decision reversed Trump-era NLRB decisions that tended to grant employers more expansive rights in utilizing confidentiality and non-disparagement language in severance agreements. (See, for example, Baylor University Medical Center, 369 NLRB No. 43, or IGT d/b/a International Game Technology, 370 NLRB No. 50.)
What brought about this new decision?
How Furloughed Employees Started A Chain Reaction
McLaren Macomb operates a teaching hospital in Mount Clemens, Michigan. Due to the shortage of work caused by various COVID-19–related policies—including requiring hospitals to curtail the number of elective and outpatient procedures and forbidding nonessential employees from working at the hospital—McLaren furloughed eleven unionized employees.
Each furloughed employee was offered a severance package that required the employee to (1) release McLaren from any claims arising out of the employee’s employment at McLaren or termination thereof, (2) keep the terms of the severance package confidential, and (3) not make disparaging or harmful remarks against McLaren. Employees who accepted the agreement and later breached it would be subject to both monetary and injunctive sanctions.
The NLRB found that McLaren violated the NLRA by furloughing the employees without notifying their union first, which would have given the employees the ability to consult the union about the effects of the severance agreement. Bypassing the employees’ union in this way was a direct violation of the NLRA.
The NLRB also found that McLaren violated Section 8(a)(1) of the NLRA by even presenting the furloughed employees with agreements containing broad confidentiality and non-disparagement provisions.
- The Board found that the confidentiality language would reasonably tend to coerce the employee against filing an unfair labor practice charge against McLaren or prohibit the employee from discussing the agreement with a union representative.
- The Board also found that the non-disparagement language would likely prohibit the employee from seeking advice about the agreement with a union representative even if the employee suspected the agreement contained an unlawful provision.
- Taken together, the two provisions impermissibly chilled the furloughed employee’s rights under Section 7 of the NLRA.
Thus, the NLRB ordered McLaren to stop offering severance agreements with such broad confidentiality and non-disparagement provisions and to alert its employees about its unfair labor practices.
Are there any limits to this decision?
Yes! The new decision applies to both unionized and non-unionized workplaces, but several types of workers are specifically excluded from the NLRA, and consequently, the new decision: supervisory employees, public-sector employees, agricultural and domestic workers, independent contractors, workers employed by their parent or spouse, and employees of air and rail carriers. Many of these employees are protected by separate laws, such as the Railway Labor Act, which covers rail carriers.
Furthermore, the Board has previously ruled that employees lose their NLRA protections if they maliciously critique their employer or make allegations they know are false. The new decision does not appear to touch these precedents.
What does this new decision mean for employees?
In the McLaren decision, the NLRB stated that confidentiality and non-disparagement provisions requiring the forfeiture of Section 7 rights will pass muster if the provisions are “narrowly tailored.” The Board did not define what it means for a provision to be narrowly tailored.
This new decision is subject to appeal, and the NLRB may yet offer more guidance on this ruling. Until such time, however, and given the expansive scope of this decision, employees should pay special attention to clauses in their agreement that demand confidentiality with regard to the agreement itself or impose non-disparagement requirements. If these are not narrowly enough tailored, they may not be enforceable.
Because employers frequently reuse general terms of documents like severance agreements, it may take years for the language to be modified to fit the “narrowly tailored” requirement of the McLaren Macomb decision.
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