A recent decision by the National Labor Relations Board (NLRB) in McLaren Macomb has both union and non-union employers taking a second look at their severance agreements. In the case, the board decided an employer violated the National Labor Relations Act (NLRA) by offering furloughed employees severance agreements that contained confidentiality and nondisparagement provisions.
What Happened in McLaren Macomb
The employer operates a hospital with over 2,000 employees. In March 2020, the government issued COVID-19 regulations that limited the employer’s operations. As a result, the employer terminated its outpatient services and eventually permanently furloughed 11 employees who happened to be represented by a union.
The employer offered the permanently furloughed employees severance agreements. Each severance agreement required the employees to keep the terms of the agreement confidential and prohibited them from disparaging the employer, related entities, and individual representatives.
The union representing the furloughed employees challenged the severance agreement in a proceeding before the NLRB with the support of the board’s general counsel. In assessing the legality of the severance agreement under the NLRA, the NLRB held that the mere offering of a severance agreement to employees is an independent violation if the agreement’s terms have a reasonable tendency to interfere with, restrain, or coerce employees in exercising their NLRA rights, irrespective of any other circumstances. The board then opined that the confidentiality and nondisparagement provisions were unlawful because they interfered with, restrained, or coerced employees in exercising their NLRA rights.
As to the confidentiality provision, the NLRB said the provision broadly prohibited employees from disclosing the agreement to any third party, which would include the board and other employees. The NLRB highlighted that it’s against public policy to prohibit individuals from cooperating with the board and that employees have the right under the NLRA to discuss their terms and conditions of employment with each other.
Regarding the nondisparagement provision, the NLRB faulted the provision for prohibiting employees from making any statement that could disparage or harm the image of the employer, related entities, and individual employer representatives without any temporal limitation. The board emphasized that “[p]ublic statements by employees about the workplace are central to the exercise of employee rights under the [NLRA].”
In rendering its decision, the NLRB did mention that not every provision in a severance agreement that arguably interferes with NLRA rights is unlawful. The board explained that the standard it set forth examines whether the relinquishment of NLRA rights is a permissible “narrowly tailored” one.
Why the Decision Matters to Your Organization
Whether your organization is unionized or not, there is a very good chance this decision applies. Most private sector employers in the United States are covered by the NLRA, irrespective of whether their workplaces are unionized. The NLRA provides both union and non-union employees with the right to engage in protected concerted activities and the right to refrain from such activities. Such activities include the right to discuss terms and conditions of employment with coworkers, publicly protest unfair working conditions, and join labor unions. Employees also have the right to file unfair labor practice (ULP) charges with the NLRB and cooperate in board investigations.
There also is a very good chance your organization’s severance agreements contain language that may run afoul of the NLRA in light of the NLRB’s decision in McLaren Macomb. It is not uncommon for an employer to include language in a severance agreement requiring employees to keep certain information confidential, preventing them from disparaging the employer, and limiting their right to pursue claims against the employer.
What Should Your Organization Do?
Employers should carefully review severance agreements, taking into consideration the McLaren Macomb decision, preferably with experienced labor counsel. Here are a few tips and takeaways:
- Before redlining your severance agreement, consider whether the employee at issue is a statutory employee under the NLRA to whom the decision in McLaren Macomb applies in the first place. As mentioned, the NLRA applies to most private sector employers in the United States and protects union and non-union employees alike, but not everyone is a statutory employee. For example, individuals who meet the definition of a statutory supervisor because they exercise independent discretion to take certain employment actions, such as hiring, disciplining, or discharging employees, are not statutory employees.
- Consider whether any language that arguably interferes with NLRA rights (e.g., confidentiality and nondisparagement provisions) is really needed. What’s the risk the employee actually would engage in conduct the employer would prefer the employee not engage in? And, if the employee engages in such conduct, how detrimental would it be to the employer? For example, confidentiality may not be important at all if the severance agreements are standardized, the severance agreements are provided in connection with a widely publicized reduction in force, and/or employees don’t have any confidential company information due to the nature of their job.
- Think about ways to narrowly tailor any potentially problematic language so it could be upheld under McLaren Macomb. The decision in McLaren Macomb recognized that language in a severance agreement that interferes with NLRA rights can be lawful if narrowly tailored. Can confidential information and disparagement be defined narrowly in the severance agreement so as to pass muster under McLaren Macomb?
- Consider disclaimers stating that nothing in the agreement interferes with the employee’s NLRA rights. At a minimum, such disclaimers should make clear that the employee can exercise rights to engage in protected concerted activities, file ULP charges with the NLRB, assist others in filing ULP charges, and cooperate with a board investigation. Whether these disclaimers ultimately can save the day will be determined, but they certainly wouldn’t do harm.
Conclusion
Before presenting an employee with a severance agreement, employers should review the severance agreement with the decision in McLaren Macomb in mind.
Amber Rogers (arogers@huntonak.com) is a partner and James La Rocca (jlarocca@huntonak.com) is a senior attorney at Hunton Andrews Kurth LLP, an international law firm with offices throughout the United States. Their practices focus on representing employers in labor and employment matters, including providing day-to-day advice and counsel to employers, litigating disputes in court, and representing employers before the NLRB.