NLRB Targets Severance Agreements

In a decision that affects union and non-union employers, the National Labor Relations Board (NLRB) recently found that certain provisions often used in severance and release agreements violate the rights of employees under the National Labor Relations Act (NLRA). The case is McLaren Macomb, 372 NLRB No. 58 (2023). The new decision was followed by a Guidance memorandum issued by NLRB General Counsel, Jennifer Abruzzo, who explained how she interprets the ruling.

The NLRA applies to non-supervisory employees, whether or not the employer is unionized. Among other things, it forbids employers from coercing or chilling employees’ exercise of their rights under the act.  For example, employers may not prohibit employees from discussing wages, hours and working conditions. Similarly, employers must allow employees to criticize the employer’s working conditions, so long as the employee does not engage in “maliciously false” speech.

Applying these principles, the Board concluded that McLaren Macomb, a Michigan hospital operator, violated the NLRA when it offered several employees a severance agreement containing broad confidentiality and non-disparagement clauses. The Board rejected the contention that the violation was prevented by either the voluntary nature of the offer or the fact that the employees would no longer work for the employer once they accepted the agreement. Significantly, although the McLaren Macomb case arose in the context of other alleged unfair labor practices, the Board held that no such context is required for an employer to violate the NLRA – the mere offer of such an unlawful agreement, whether accepted or not, is sufficient.

Employer Takeaways

In the time since the Board released its decision, there has been much debate in the employer community about how to respond. Among the topics of discussion:

• Is it possible that McLaren Macomb will successfully appeal? It’s possible, maybe even likely, that a U.S. Circuit Court of Appeals would reach a different decision, but keep in mind that: (a) many Board cases are settled before an appeal goes forward, and (b) unless a court issues a stay, the Board’s decision remains the law of the land until it is overturned.

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• What about the General Counsel’s position? General Counsel Abruzzo believes the Board’s decision should be retroactive. In other words, she believes it should apply to prior agreements, possibly even those entered into beyond the NLRA’s statute of limitations of six months. She also indicated that a confidentiality agreement would need to be limited to restricting only trade secrets for a limited period of time. Unlike the Board’s decision, the General Counsel’s interpretations are not legally binding, but it does indicate that this likely will not be the end of regulation in this area.

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• Is there any other new law affecting severance agreements? Employers were already updating severance agreement language to ensure they comply with the Speak Out Act, a federal statute restricting confidentiality related to sexual harassment or assault claims.

What should employers do now?

Even realizing the board’s decision may not be the final word, employers should take steps to comply with the ruling. First, we recommend employers ensure their release language clearly carves out participation in government investigations. We believe there is confidentiality and non-disparagement language that would comply with the board’s ruling, although it will likely be less thorough than what was considered standard prior to McLaren Macomb. In summary, employers should consult with an attorney and used revised language for all non-supervisory employee severance agreements. Contact a member of our Labor & Employment team if you have any questions about your current severance agreements.