On February 21, the National Labor Relations Board (NLRB) issued a decision in McLaren Macomb holding that employers may not offer employees separation or severance agreements that require employees to broadly waive their rights under the National Labor Relations Act (NLRA). In McLaren, a hospital furloughed 11 employees, presenting each with a severance agreement and general release that contained confidentiality and non-disclosure provisions. (See the exact provisions copied below.) The Board majority held that merely “proffering” a severance agreement containing unlawful confidentiality and non-disparagement provisions violated the NLRA because conditioning the receipt of benefits on the “forfeiture of statutory rights plainly has a reasonable tendency to interfere with, restrain, or coerce the exercise of those rights.”
At first blush, this may feel like a sweeping change requiring immediate action. However, it is important to consider this decision with a grain (or two) of salt, breathe and thoughtfully plan your next steps. The key points identified below are designed to help you think through a tailored approach for your organization¾there is not a one-size-fits-all solution. Your approach will depend on the type of workforce you have, your risk tolerance and what you are trying to protect. We are standing by, ready to assist, should you need further guidance.
- For most private, nonunion employers, the risk of an unfair labor practice charge is relatively low. While it is absolutely true that the NLRA does indeed apply to most private sector employers, the NLRB and unions tend to focus more on unionized workplaces. (If you have a unionized or partially unionized workforce, the risk is higher but read on.)
- Given the lower risk for nonunion workplaces, we suspect many employers will take a wait and see approach. Many employers will pause to see if the decision is challenged in court, and / or if there are further developments or clarifications on its scope. Note that the decision may impact confidentiality agreements, handbook provisions, and other workplace policies beyond separation and severance agreements, requiring a finer review of such agreements.
- Remember that the NLRA only protects non-supervisory employees. This means separation or severance agreements with supervisory, managerial and executive employees can continue to restrict confidentiality and disparagement.
- Under the Act, the term “supervisor” means “any individual having authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibly to direct them, or to adjust their grievances, or effectively to recommend such action, if in connection with the foregoing the exercise of such authority is not of a merely routine or clerical nature, but requires the use of independent judgment.”
- While the Act does not mention “managers,” case law and Board decisions have included managers within the definition of supervisors over time.
- Supervisors can join unions under the Act, but employers don’t have to treat them as covered employees.
- The current Board takes a strict view on who qualifies as a supervisor under the NLRA with an eye towards the inclusion of more individuals being covered “employees” under the Act.
- The decision did not address the impact of carve outs or “savings clauses.” Nonetheless, we strongly recommend reviewing existing agreements and policies to ensure they explicitly carve out the right to engage in concerted activities under Section 7. We have recommended language for this.
- If a separation agreement contains terms that could be interpreted as restricting employees Section 7 rights, such restrictions should be crafted as narrow as possible and explicitly state that the separation agreement does not preclude employees from assisting their coworkers with workplace matters or from communicating with others, including a union or the Board, regarding their employment.
- For very risk-adverse organizations, the most conservative approach is to remove non-disparagement and confidentiality provisions that prohibit: (1) making statements that could disparage or harm the image of the employer and (2) disclosing the terms of the agreement.
- The Board has limited remedies available to enforce this decision.
- It is limited to granting make whole relief.
- Where the sole unfair labor practice is the proffer of a severance agreement with an “unlawful” confidentiality or non-disparagement provision, the remedy would be limited to the rescission of the unlawful provision and posting of a notice that the employer will cease and desist from including such provisions in future severance agreements.
- Even with the Board’s recent expansion of consequential damages, there wouldn’t be any monetary damages available absent an enforcement effort by the employer. In theory, the Board could rescind the full agreement, but it is unlikely that the Board would invalidate the release or order the employee to return the severance payment.
- We recommend including strong severability language in impacted agreements. This could help save the rest of the agreement (including that ever-important release of claims) if any provision is found to be unlawful or unenforceable.
* The agreements at issue in McLaren contained the following language:
Confidentiality Agreement. The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.
Non-Disclosure. At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.