What will that NLRB decision do to separation agreements?

Two cents from an employment lawyer.

My colleague David Phippen wrote an excellent bulletin about this week's McLaren Macomb decision from the National Labor Relations Board, in which the Board ruled that offering separation agreements with non-disparagement and confidentiality provisions constitutes unlawful interfere with employees' Section 7 rights under the National Labor Relations Act.

"But we're non-union, so we're cool."

No, you're not. Well, you may be non-union, but you're not cool. Well, you may be cool, but you can't ignore this decision.

Section 7 doesn't apply only to employees who are represented by unions. With only limited exceptions, all employees have Section 7 rights. Under Section 7, employees have

the right 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."

And Section 8(a)(1) of the NLRA says it is an unfair labor practice for an employer to"to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7."

Again, what the Board did this week was say that it is unlawful "interference" with an employee's Section 7 rights to offer a severance package in exchange for an agreement that includes non-disparagement and confidentiality terms.

Yes, the mere offer is a violation. Not even forcing the employee to accept. 

It's an awful decision, but employers have to live with it for now. I see at least two small rays of sunshine.


First, I'm not sure that the Board took issue with all confidentiality requirements in separation agreements. The Board invalidated provisions that prohibit an employee from discussing the agreement with anyone other than attorneys, financial advisors, and spouses -- a very standard term. I'll refer to this as a "confidentiality-of-agreement" term.

What I did not see in the NLRB decision was an indication that employers couldn't continue to ask for confidentiality of their trade secrets and proprietary business information. Or that a health care employer couldn't continue to ask for confidentiality of patient information. So, assuming I read that right, that's a (tiny) bit of good news.

More significantly, not every employee is an "employee" within the meaning of the NLRA. For example, it's still perfectly legal to offer your Chief Financial Officer a severance package in exchange for his agreement to keep his mouth shut. Ditto for your middle managers, and even your front-line supervisors (usually). Also, your independent contractors, assuming they really are independent contractors.

That's because the NLRA excludes certain classes of workers from its definition of "employee." This is from the NLRB website:

Excluded from coverage under the [NLRA] are public-sector employees (employees of state, federal and local governments and their sub-divisions), agricultural and domestic workers, independent contractors, workers employed by a parent or spouse, employees of air and rail carriers covered by the Railway Labor Act, and supervisors (although supervisors that have been discriminated against for refusing to violate the NLRA may be covered)."

I'd like to focus on the NLRA definition of "supervisor," because I think that is the most significant exception that will apply to most private sector employers.

Some employees are called "supervisors," but they aren't really supervisors in the legal sense. Section 2(11) has the characteristics of a true "supervisor" for NLRA purposes (aka "person you can still require to agree to no-disparagement and confidentiality-of-agreement in exchange for a separation package unless prohibited by some other law"):

  • The authority to hire, transfer, and suspend employees.
  • The authority to lay off, recall, and promote employees.
  • The authority to discharge, assign, reward, or discipline employees.
  • The authority "responsibly to direct" employees.
  • The authority to "adjust [employees'] grievances."
  • Or the authority "effectively to recommend" the above.
  • And the authority cannot be of a "routine or clerical nature" but must require the exercise of independent judgment.

With employees at a certain level and above -- like our middle managers, and even most front-line supervisors -- this will be an easy call. With these people, you can continue to use agreements that have non-disparagement and confidentiality-of-agreement provisions.

Supervisor status is fuzzier with employees like lead persons, forepersons, team leaders, and the like, depending on their specific duties and authority. In most cases, they will be considered "NLRA employees." As will the rest of your non-management workforce.

With your "NLRA employees," here are your options in the event of a termination or reduction in force. Please note that the first one is very likely to get you in trouble with the Board:

  • Offer your normal separation package with an agreement that has non-disparagement and confidentiality-of-agreement provisions, but add a "Section 7 disclaimer." For example, "PROVIDED, HOWEVER, nothing in this Agreement is intended to prohibit Employee from engaging in any activity protected by Section 7 of the National Labor Relations Act." (Again, this is a high-risk option. The NLRB is almost sure to say that a mere disclaimer isn't enough to protect employee rights.)
  • Offer your normal separation package with an agreement that does not contain non-disparagement or confidentiality-of-agreement provisions but that does contain other provisions important to you -- such as a release of claims. And maybe throw in a Section 7 disclaimer for good measure. (This is much better than the first option, but it still has some degree of risk because who knows which agreement terms will be invalidated by this NLRB in the future? Does asking for an agreement not to sue "interfere" with an employee's Section 7 rights?)
  • Offer a modest amount of severance pay without requiring an agreement at all. I have had some clients do this with hourly employees who are affected by a RIF. (No risk with the NLRB, but you're paying employees without getting any protection from litigation in return.)
  • Don't require an agreement, and don't pay any severance. (This leaves you unprotected from litigation, but the NLRB won't care, and at least you didn't have to pay to be unprotected. Too bad for the employees losing their jobs, though. Thanks, NLRB!)

As David points out in his bulletin, it's very possible that the employer in the McLaren Macomb case will ask a court to review the NLRB decision, and it's possible that the court will refuse to enforce it. But the process is slow, and a pro-employer outcome is far from assured. So, for now, employers should review, and then probably amend, the standard separation agreements that they use with employees who are covered by the NLRA.

Robin Shea has 30 years' experience in employment litigation, including Title VII and the Age Discrimination in Employment Act, the Americans with Disabilities Act (including the Amendments Act). 
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