NLRB Strikes Damaging Blow to Enforcement of Confidentiality Provisions in Severance Agreements

Last week the National Labor Relations Board (NLRB) issued its latest precedent-shifting decision, this time ruling that a number of common severance agreement provisions violate the National Labor Relations Act (NLRA) simply by being included in a severance agreement offered to a non-management employee. In McLaren Macomb, the Board determined that standard confidentiality, non-disparagement, and non-participation provisions – typical in most severance agreements – interfere with the ability of non-management employees to exercise their Section 7 rights and, as a result, are unlawful under the NLRA.

The case revolved around a reduction in force conducted by McLaren Macomb hospital in Michigan. The hospital laid off eleven employees and offered each a severance package as part of the RIF. All eleven employees signed the agreements and accepted the severance benefits. Each of the agreements contained the standard severance agreement provisions, including confidentiality, non-disparagement, and non-participation clauses. Following the employees’ acceptance of the severance benefits, their union filed unfair labor practice charges, alleging, among other things, that the severance agreement provisions were unlawful.

In agreeing with the union, the Board held that these provisions interfered with the ability of workers, including current and former employees, to communicate regarding the terms and conditions of employment and to work together to alter those terms and conditions. Moreover, the Board ruled that these provisions also interfered with workers’ rights to communicate using administrative, judicial, legislative, and political forums, the media, social media, and communications to the public.

While the Board did not determine that the agreements as a whole were unenforceable, the Board’s decision did mean that the Hospital could not enforce the specific confidentiality, non-disparagement, and non-participation clauses at issue. So, what does this mean for employers more broadly? First, it means that, if challenged, such clauses in prior severance agreements are likely not enforceable under this NLRB ruling. Second, employers have three options to consider for severance packages with non-management employees going forward:

  1. Employers can retain their current confidentiality, non-disparagement, and non-participation clauses as is, with the knowledge that their ability to enforce the provisions has been hampered by the NLRB. (Retention of these provisions should not create any issues with the overall enforceability of the agreement, so long as the agreement contains an appropriate severability clause – in other words, a clause that states that, should any particular provision be found to be void or unenforceable, the remainder of the agreement remains enforceable.)
  2. Employers can revisit their current confidentiality, non-disparagement, and non-participation clauses, tailoring them to meet the standards set forth by the NLRB in McLaren Macomb and improving the likelihood of enforceability.
  3. Employers can choose to remove these provisions from the severance agreements, ensuring that the NLRB’s decision will not have any impact upon the enforceability of such agreements.

President Biden promised that his Department of Labor and NLRB would be the most labor friendly in history. With its decision in McLaren Macomb, the NLRB continues to deliver on that promise. Stay tuned as 2023 will continue to be a busy year for the NRLB, and consequently, for employers trying to stay on track with these many changes.

If you have questions regarding the NLRB’s ruling on severance agreement provisions, please contact Michael W. Bowling or another member of the firm’s Labor & Employment Practice Group.

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Associated People:

Michael W. Bowling

Practice Area:

Labor & Employment