On Tuesday, the National Labor Relations Board issued yet another decision reversing precedent established by the Trump-era Board in 2020. In McLaren Macomb, the three-member Democratic majority decided that employers may not offer severance agreements that require employees to effectively waive their rights under Section 7 of the National Labor Relations Act.
And that includes non-disparagement and confidentiality provisions.
The decision applies not only to union-represented employees or union members, but also to anyone who is an “employee” within the meaning of the NLRA (generally, any covered “employee” who is not a “supervisor”).
The employer, a hospital, terminated 11 “non-essential” workers during the height of the COVID-19 pandemic, and offered severance agreements to the affected employees, all of whom were represented by a union. The employer did not bargain over the decision to terminate the employees, about the effects of the decision, or about the separation agreement. All 11 employees accepted the severance agreement offered. An administrative law judge of the NLRB found that the employer violated Sections 8(a)(1) and 8(a)(5) of the NLRA by failing to bargain. However, the ALJ found that the agreements themselves did not violate the NLRA, relying on the Trump-era precedent that the Board overturned on Tuesday.
The ALJ decision was reviewed by the NLRB. In Tuesday’s decision, the Board majority found that even offering employees a severance agreement that requires the employees to effectively give up rights under Section 7 violates Section 8(a)(1) of the Act. In the majority view, such an offer is an attempt to deter employees from exercising their Section 7 rights so that they can receive the benefits of the agreement. Therefore, it has a reasonable tendency to interfere with, restrain, or coerce employees in the exercise of their rights.
The Board decision indicates that this Board majority believes
- That employees have the right to disparage their employers and to publicize the terms and conditions of their employment (or termination of employment). This includes bringing disputes to the NLRB or airing them in public.
- That employees should not have the freedom of contract to waive any Section 7 rights, even for valuable consideration such as severance pay.
Member Marvin E. Kaplan, the lone Republican on the Board, dissented, commenting that “extant law [was] sufficient to resolve this matter…,” and arguing that the Board could have reached a decision in the case by applying the Trump-era Board precedent and not overruling it.
In a press release issued after the decision, Chair Lauren McFerran commented, “It’s long been understood by the Board and the courts that employers cannot ask individual employees to choose between receiving benefits and exercising their rights under the National Labor Relations Act. Today’s decision upholds this important principle and restores longstanding precedent.”
NLRB General Counsel gets her wish
The Board majority followed the path advocated by NLRB General Counsel Jennifer Abruzzo, who was appointed by President Biden. On August 12, 2021, GC Abruzzo issued a memorandum listing Trump-era decisions that she wanted overruled. Non-disparagement and confidentiality provisions in separation agreements like those at issue in McLaren Macomb were on her list.
The employer in this case may seek review of the Board’s decision by a U.S. Court of Appeals. Whether the appellate court or the U.S. Supreme Court will agree with the Board remains to be seen. In any event, employers (even those whose employees are not represented by a union) would be prudent to take the McLaren Macomb decision into account as they offer severance packages to “employees” covered by the NLRA. One possible perverse effect of the decision may be that employers will be less inclined to offer severance packages to NLRA “employees.” Employees may be deprived of chances to say, “yes, I will take the deal.”
Employers should also be aware that non-disparagement and confidentiality provisions in separation agreements may also create risk with other government agencies and under some state laws. Accordingly, the Board’s decision is a reminder that employers should include appropriate carve-outs in their standard agreements for non-waivable statutory and regulatory rights, including participation in charges, investigations, and proceedings before agencies such as the U.S. Equal Employment Opportunity Commission. Standard contract terms that may require specific carve-outs include waivers, releases, covenants not to sue, and non-disparagement and confidentiality provisions.