On February 21, 2023, the National Labor Relations Board (“NLRB” or the “Board”) released a decision in the case of McLaren Macomb, 372 NLRB 58, ruling that severance agreements that included broad confidentiality and non-disparagement clauses violate the National Labor Relations Act (the “Act”). This ruling applies to both unionized and non-union workforces.
What Rights Does Section 7 of the Act Protect?
Section 7 of the Act states that employees have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively though representatives of their own choosing, and — importantly for non-unionized workforces — to engage in other “concerted activities”. “Concerted activities” are legally protected actions involving two or more workers acting together to better their pay or working conditions. A protected concerted activity might include a group of employees speaking to each other about unsafe working conditions, workers bringing up unequal pay to management, or employees discussing workplace grievances with each other. Section 7 makes it illegal to prohibit, chill or threaten employees’ rights to engage in these activities, or to unfairly coerce them into giving up those rights.
What Happened in McLaren Macomb?
In March of 2020, a hospital in Michigan laid off 11 workers, and offered those employees a “Severance Agreement, Waiver and Release.” This agreement contained confidentiality and non-disclosure provisions. The confidentiality provision stated that employees could not disclose the terms of the severance agreement to anyone other than a spouse or family member, unless it was for legal or tax purposes. The non-disparagement provision required the employee not to make statements about the hospital which disparaged or harmed the image of the hospital, its employees or directors.
The Board held that the mere offer of an agreement with these provisions in it violated the Act, because the two requirements impeded on these workers’ rights to engage in protected concerted activities. Since the provisions would prevent the terminated employees from telling current employees about their severance packages, and would prevent them from complaining about their former workplace in a way that would generally be permissible under the Act, the provisions coerced the employees into giving up their Section 7 rights in a way that the Board deemed unlawful.
Can Severance Agreements Now Include Any Confidentiality or Non-Disparagement Clauses?
Even with this decision from the Board, carefully drafted, narrowly-tailored and specific confidentiality and non-disparagement clauses can still be included in severance agreements. The Board held that part of the reason that these clauses impeded on worker’s Section 7 rights is because of how broad and overreaching they were. Confidentiality clauses that pertain to information other than the existence and amount of a severance agreement are still lawful. The case suggests that non-disparagement clauses that are limited in time, tailored to the actual employer and not its parent, successors or affiliates, limited to matters related to the employees’ employment with the company, and include a definition of what non-disparagement means are also lawful and can still be included in a severance agreement.
Does This Ruling Apply to All Severance Agreements?
These restrictions apply generally to all severance agreements, but employees who do not have Section 7 rights under the Act are excluded from this ruling. Excluded employees include managers, most supervisors, public sector employees, and some agricultural workers.
When does this Ruling Apply?
The ruling applies immediately.
What Does this Mean for Employers?
All severance agreements should be reviewed to ensure that they do not include confidentiality and non-disparagement provisions that violate the Act. Employers should tread very carefully and seek legal counsel if they want to include these types of provisions in its severance agreements, and if they do, narrowly tailor those provisions as to not violate a worker’s Section 7 rights and render the mere offer of the agreement unlawful.
Please contact Heather Hammond (hhammond@gravelshea.com) at
Gravel & Shea PC if you have questions or would like assistance.
