The National Labor Relations Board issued a decision on Tuesday, February 21, effectively wiping out several Trump-era rulings allowing employers to include confidentiality and non-disparagement provisions in severance agreements. The current Board now takes the stance that it is an unfair labor practice for a company to offer severance agreements to terminated employees that require confidentiality and/or non-disparagement clauses.
In McLaren Macomb, 372 NLRB No. 58 (2023), the Board examined whether an employer violated Section 8(a)(1) of the National Labor Relations Act [1] by including terms in the severance agreements offered to several permanently furloughed employees prohibiting the employees from making disparaging statements or disclosing the terms of their severance agreements. Despite prior precedent allowing for the inclusion of these clauses, the Board found the non-disparagement and confidentiality provisions unlawful because they “interfered with, restrained, and coerced” the employees in their exercise of Section 7 rights.[2]
Going a step further, the Board also found that an employer’s mere “proffering” of a severance agreement with these provisions is an independent violation of Section 8(a)(1). According to the Board, conditioning the receipt of severance benefits on the acceptance of non-disparagement and confidentiality provisions is coercive in and of itself and an unfair labor practice.
In evaluating this new ruling, employers should keep the following in mind:
- The Board’s decision applies only to non-managerial employees with Section 7 rights. Not all workers have Section 7 rights, including independent contractors, managers, and most supervisors.
- The Board acknowledged, but did not clearly define, the possibility that a “narrowly tailored” disclaimer could make these provisions allowable, so long as the employee is affirmatively made aware of their ability to (i) participate in Section 7 activity; (ii) file an unfair labor practice charge; (iii) assist others in filing a charge or participating in Section 7 activities; and (iv) otherwise cooperate with any Board investigation.
- The Board’s General Counsel will likely release one or more advisory memos to provide more information about what constitutes lawful versus unlawful severance covenants. BurnsBarton will continue to monitor the situation.
- Given that this decision contradicts prior Board decisions, we anticipate it will become one of those hot potato issues that will flip back and forth based on which party is in power.
- And finally, NLRB enforcement power in this context is rather toothless. A release would be subject to Board scrutiny only if an employee (or former employee) filed an unfair labor charge with the Board. The NLRB receives around 30,000 charges each year. If the NLRB decides to investigate the case, and finds sufficient evidence to support the charge, the Board will attempt to facilitate a settlement between the parties. If a settlement cannot be reached, the Board will issue a complaint and a hearing before an NLRB Administrative Law Judge might ensue. But the NLRB cannot assess penalties; it can seek only reinstatement, backpay, and notice postings. The NLRB Regional Director may also petition the District Court for a temporary injunction order.
Nevertheless, employers at present should consider this new decision when drafting and utilizing severance agreements for non-managerial employees. If you have questions or want to ensure your severance agreements are compliant, please contact Alexandra Miller at alex@burnsbarton.com, or your favorite BurnsBarton attorney.
—-
[1] Section 8(a)(1) of the NLRA makes it an unfair labor practice for an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7.”
[2] Section 7 of the NLRA guarantees employees “the right to self-organization, to form, join, or assist labor organization, 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.”
