NLRB Decision on Separation Agreements Affects All Private Sector …

If your business needs to terminate an employee and offer a severance agreement, pay close attention to a February 21, 2023 decision by the National Labor Relations Board (“Board”), McLaren Macomb, et al., Case 07-CA-263041.  In McLaren, the Board evaluated the confidentiality and non-disparagement clauses of severance agreements offered to a group of furloughed employees by a Michigan hospital, and found that the language improperly required employees to broadly give up their rights under the National Labor Relations Act (NLRA). The decision is a major development for private sector employers across the country, particularly because confidentiality and non-disparagement provisions are typically standard in severance agreements with departing employees. The NLRA: More Than Just a Law for Unionized Workplaces

While the Board and the NLRA are largely associated with labor unions, the NLRA’s scope is expansive.  In particular, Section 7 of the NLRA protects the rights of employees – in both union and non-union settings – 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,” as well as the right “to refrain from any or all such activities.” Section 8(a)(1) makes it an unfair labor practice for an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in [Section 7].” Section 7 is applicable to most private employers, though it does not apply to management-level employees or other individuals who constitute “supervisors” under the NLRA.  Of note, the Board takes a very strict approach as to who qualifies as a “supervisor” for purposes of the law, and job titles, alone, will not make someone a “supervisor.” Navigating Severance Agreements Post-McLaren

The McLaren decision seems to have generated more questions than answers among employment lawyers and human resources professionals in the weeks since its issuance.  In response to “inquiries from workers, employers, labor organizations, and the public about implications stemming from [McLaren],” on March 22, 2023, the Board’s Office of the General Counsel issued a memorandum (GC-23-05) to provide additional guidance on the decision.  The guidance does not go so far as to offer model language, but suggests that “narrowly tailored” confidentiality and non-disparagement severance agreement language “may” still be lawful in certain circumstances:

• Confidentiality provisions: The guidance states that while “narrowly-tailored confidentiality clauses,” such as to “restrict the dissemination of proprietary or trade secrets for a period of time based on legitimate business justifications” may still be lawful, clauses “that have a chilling effect that precludes employees from assisting others about workplace issues and/or communicating with the [Board], a union, legal forums, the media or other third parties are unlawful.”
• Non-disparagement provisions: The guidance states that “a narrowly-tailored, justified, non-disparagement provision that is limited to employee statements about the employer that meet the definition of defamation… may be found lawful.”

The General Counsel’s guidance confirms that the Board’s decision applies retroactively, so enforcing a previously-entered separation agreement with unlawful provisions continues to be a violation under the NLRA.  The guidance further notes that “overly broad provisions in any employee communication” would be “unlawful if not narrowly tailored,” suggesting that the McLaren principles apply not only to severance agreements, but also to documents such as offer letters, employment agreements, and potentially handbooks and policy documents. Check Your Agreements for Compliance with McLaren This brief article merely scratches the surface of the McLaren decision and its potential implications for employers.  Businesses should review their current severance agreements, including those that are still in effect with former employees, to assess their legality under the NLRA.

Moving forward, employers would be well-advised to work with trusted employment counsel to ensure that their severance agreements (and other related employment documents) both accomplish their business goals, and comply with the McLaren decision.