The National Labor Relations Board (NLRB) recently held in its McLaren Macomb decision that an employer may violate the National Labor Relations Act (NLRA) through the “mere proffer” of a severance agreement if it contains broad non-disparagement and confidentiality clauses. There, a unionized hospital in Michigan furloughed 11 employees whose jobs were deemed nonessential during the COVID-19 pandemic. The hospital offered each employee a severance agreement that contained the following language:

  • 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.

At first blush, these provisions may appear commonplace. However, the NLRB concluded both of these clauses–as well as any offers made containing them–violated the NLRA.

Specifically, Section 7 of the NLRA guarantees employees the right to do various things, such as to discuss the terms and conditions of their employment, to discuss their wages, and to collectively bargain, among others. In turn, Section 8(a)(1) of the NLRA prohibits employment practices that “interfere with, restrain, or coerce employees’ exercise” of their Section 7 rights. In McLaren Macomb, the NLRB concluded these clauses would tend to “chill” employees’ ability to engage in activity protected by Section 7 of the NLRA, thereby violating Section 8(a)(1).

With respect to the non-disparagement provision, the NLRB explained that employees have the right to critique employer policy under the NLRA, so long as the critique is not “so disloyal, reckless, or maliciously untrue to lose the Act’s protection.” The non-disparagement clause, however, “would encompass employee conduct regarding any labor issue, dispute, or term and condition of employment of the” employer. In addition, it contained no temporal limitation, and would “extend to efforts by furloughed employees to raise or assist complaints about [their employer] with their former coworkers, the Union, the [NLRB], any other government agency, the media, or almost anyone else.” Therefore, it was deemed impermissibly overbroad.

The confidentiality clause fared no better. The NLRB first focused on the language prohibiting disclosure of the terms of the severance agreement to “any third person” and concluded it would effectively prohibit employees from disclosing “even the existence of an unlawful provision contained in the agreement.” The clause would also broadly prohibit employees from speaking to co-workers, their union, the NLRB, or others about potentially unlawful workplace issues. As a result, the clause was found impermissible.

The NLRB’s decision also represents a retreat from the position it charted only a few years earlier in its Baylor University Medical Center and IGT opinions. In those cases, the NLRB had also looked at the circumstances in which the severance agreement was presented, and whether “employer animus” toward Section 7 activity was demonstrated. Now, however, “the mere proffer of the agreement itself” may violate the NLRA if it contains problematic provisions like those used here.

Finally, Employers should be aware of the contours and limits of the McLaren Macomb decision. For one, the decision likely does not affect agreements entered into between employers and managers, independent contractors, or others who would be considered supervisors (rather than “employees”) under the NLRA. Nonetheless, McLaren Macomb represents an abrupt shift in the manner in which many employment-related agreements can be drafted, and so it may be prudent to consult with legal counsel to ensure compliance.

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