On February 21, 2023, the National Labor Relations Board (“NLRB” or the “Board”) returned to established precedent and found that a severance agreement which included broad non-disparagement and confidentiality clauses violated the employees’ section 7 rights under the National Labor Relations Act (“NLRA”). In the Mclaren MaComb decision a Michigan hospital had given 11 employees it permanently furloughed identical severance agreements. The severance agreement in question contained a non-disparagement clause where the employees had to agree they could not make any statements that could cause harm or potentially disparage their former employer. Similarly, the employees could not disclose the terms of the severance agreement with few limited exceptions. Employees who violated either provision could face monetary penalties. By signing the agreement, the employees agreed to release any potential legal claims they had against the hospital. The NLRB general counsel challenged the language of both clauses as violating the employees’ section 7 right and therefore violating section 8(a)(1) of the NLRA. The Board agreed. Under Section 7 of the NLRA employees have, “the right to self-organization, to form, join, or assist labor organizations, 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." The Board found that the non-disparagement clause barred protected activity under the NLRA such as voicing opposition to an employer’s labor practices. Additionally, the clause was not limited to matters related to employment, contained no time limit, and extended the protection to entities related to the hospital. The NLRB found the end result to chill employees’ exercise of section 7 rights. Similarly, the confidentiality clause was found to be unlawful as it forbids disclosure of terms of the agreement, including the existence of the non-disparagement clause, or discussing the agreement with fellow employees. In so holding the Board reversed two prior decisions. Baylor University Medical Centers and IGT d/b/a International Game Technology. These two decisions proved to be outliers from the Board’s prior precedent. Specifically, the Board acknowledged that neither case contained any analysis of the language in the challenged provisions. The Board returned to its holding that the “mere proffer” of a severance agreement that chills an employee’s section 7 rights is unlawful, meaning that offering an employee an agreement with provisions that violate the NLRA is in itself unlawful. An employee receiving an offer for a severance agreement should be sure to scrutinize the language of the agreement, and be mindful of what specifically they are agreeing to. Facially illegal clauses may provide the employee with a bargaining tool through the severance negotiation process. If you are an employee looking to negotiate a potential severance package, or better understand the terms of a severance agreement that has been offered to you, our attorneys are here to help. Contact our Milwaukee office at 414-271-8750 or our Madison office at 608-257-0400 to set up a consultation.
New NLRB Decision Restricts Common Severance Agreement Terms