The National Labor Relations Board (“NLRB” or the “Board”) held in a February 2023 decision, McLaren Macomb, 372 NLRB 58 (2023), that the “mere proffer” of a severance agreement which conditions receipt of benefits upon forfeiture of protected rights under the NLRA constitutes an unfair labor practice. Specifically, NLRB 58 (2023), the Board held that a severance agreement that included broad non-disparagement and confidentiality clauses violated the employees’ rights to engage in concerted activity under section 7 of the National Labor Relations Act (“NLRA”).
McLaren Macomb, a Michigan-based hospital, furloughed non-essential employees due to government restrictions at the onset of the COVID-19 pandemic. The hospital eventually decided to permanently furlough 11 employees and offered them identical severance agreements. These agreements contained a non-disparagement clause that prohibited the employees from making any statements that could cause harm or potentially disparage the hospital. Similarly, the employees could not disclose the terms of the severance agreement with a few narrow exceptions. Employees who violated either provision could face monetary penalties and injunctive relief. By signing the agreement, the employees agreed to release any potential legal claims they had against the hospital. The NLRB general counsel challenged both clauses, contending that the agreement violated the employees’ section 7 rights and therefore violated 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.” Section 8(a)(1) of the NLRA makes it an unfair labor practice “to interfere with, restrain, or coerce employees” in their exercise of rights protected under section 7.
Board held that the non-disparagement clause barred activity that was protected under the NLRA and was therefore facially unlawful. The agreement’s non-disparagement clause was broad in scope. Under the clause, an employee could not make any statements that which could “disparage or harm the image of [the] employer.” It was not limited to matters related to employment, contained no time limit, and extended the non-disparagement protection to entities related to the hospital. The clause would conceivably include the existence of organizing and discussing unfair labor practices with other employees.
The NLRB held that the clause impermissibly chilled employees’ exercise of section 7 rights. Similarly, the confidentiality clause was found to be unlawful as it forbade disclosure of terms of the agreement, including the existence of the non-disparagement clause, as well as any discussion of the agreement with fellow employees. In so holding the Board reversed two prior decisions: Baylor University Medical Centers, 369 NLRB No. 43 (2020) and IGT d/b/a International Game Technology, 370 NLRB No. 50 (2020). In Baylor University Medical Centers, the Board found that the “mere proffer” of an unlawful agreement in itself was not an unfair labor practice. IGT d/b/a International Game Technology, decided a few months later, reached the same conclusion as Baylor University Medical Centers, noting that absent other illegal behavior there was no violation of the NLRB. The McLaren Macomb Board viewed these two decisions as outliers from prior Board precedent. It held that although past illegal behavior by the employer may be relevant or amplify the coercion tactics used in a severance agreement, or such behavior is necessary for a finding that the act was violated. The McLaren Macomb Board held that Baylor University Medical Centers was incorrect in requiring prior illegal behavior. Baylor University Medical Centers abandoned specific analysis of the language of the agreement in question and identified no legitimate employer interests that its holding served. The Baylor University Medical Centers Board instead focused on proving an employer’s animosity toward protected activity, which is not necessary to find a violation of the NLRA. Instead, McLaren Macomb returned to the holding that the “mere proffer” of a severance agreement can chill an employee’s exercise of section 7 rights and is therefore unlawful.
Following the McLaren Macomb decision, NLRB General Counsel Jennifer Abruzzo issued a national guidance memorandum to all NLRB field offices. The memorandum included a question-and-answer section responding to frequently fielded inquiries. Attorney Abruzzo emphasized that while severance agreements are still lawful, they must follow the ruling of McLaren Macomb. Specifically, she noted that the McLaren Macomb decision, like other NLRB decisions, applies retroactively. While NLRB violations have a 6 month statute of limitations, Attorney Abruzzo notes that maintaining or enforcing a provision of an illegal severance agreement would also constitute an unfair labor practice. This guidance suggests that although employees who have signed or were offered severance agreements more than 6 months ago may be outside the statute of limitations, they need not fear an employer seeking damages for engaging in statutorily protected activity. For example, if an employee who previously signed a severance agreement now engages in discussions that could be viewed as disparaging an employer under the terms of their severance agreement, but if that same activity is also protected under section 7, then they are entitled to protection under McLaren Macomb. Similarly, employees can anticipate that severance agreements, specifically non-disparagement clauses, will now be more tailored in scope. Employers who continue to use boilerplate language in severance agreements risk running afoul of the NLRB. Finally, as noted by Abruzzo in her guidance, McLaren Macomb, like other NLRB decisions, generally does not apply to supervisors. But as Abruzzo noted, the decision may protect supervisory employees who face retaliation for refusing to violate the NLRA on their employers’ behalf.