On February 21, 2023, the National Labor Relations Board (“NLRB”) issued a decision focusing on confidentiality and non-disparagement provisions in employment severance agreements. In McLaren Macomb v. Local RN Staff Council, 372 NLRB No. 58 (2023), the NLRB found that non-disparagement and confidentiality provisions, which are commonly included in severance agreements, unlawfully violate employees’ rights under Sections 7 and 8(a)(1) of the National Labor Relations Act (“NLRA”). As discussed below, the NLRB’s decision will have resounding effects on employers and employment practices.
As background, the NLRA was passed in 1935 to protect workers’ rights to engage in collective bargaining practices. More specifically, Section 7 of the NLRA guarantees employees the right to join labor organizations and to bargain collectively for the purposes of “mutual aid or protection.” To protect those rights guaranteed in Section 7, Section 8(a)(1) of the NLRA places restrictions on employers, making it an unfair labor practice to “interfere with, restrain, or coerce employees” in the exercise of employees’ collective bargaining rights. The NLRA applies to both unionized and non-unionized workers, so NLRB decisions interpreting the NLRA, such as McLaren Macomb, likewise apply to unionized and non-unionized employers (though not supervisors and managers).
In McLaren Macomb, eleven unionized employees were permanently furloughed as a result of government restrictions on outpatient procedures at the beginning of the COVID-19 pandemic. As a part of the furlough, the employer presented the employees with a “Severance Agreement, Waiver and Release.” The severance agreement included the following confidentiality and non-disparagement provisions:
Confidentiality Agreement. The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.
Non-Disclosure. At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.
In its decision, the NLRB found that the employer violated Sections 7 and 8(a)(1) of the NLRA because the employer did not notify the employees’ union, and instead directly dealt with the unionized employees in offering the severance agreement. The NLRB emphasized that the “mere proffer” of an agreement with these commonplace provisions represents an attempt to “coerce” an employee—regardless of whether the employees themselves elect to sign the agreement. Consequently, so long as a severance agreement includes confidentiality and non-disparagement provisions, employers will likely not be able to raise the defense that they did nothing to enforce the agreement.
So what does this mean for employers moving forward? It’s hard to say definitively because the NLRB’s decision remains subject to appeal. While it stands as law at present, the judicial process has yet to fully play out. And given that administrative agencies’ decisions can be heavily influenced by politics (McLaren Macomb itself overruled two Trump-era decisions from 2020), there is a possibility that the pendulum could swing back in a few years. Nevertheless, it is important to remember that the NLRA grants rights to both unionized and non-unionized workplaces alike. Accordingly, McLaren Macomb could potentially have broad reaching impact in all workplaces.