On February 21, 2023, the National Labor Relations Board ruled that confidentiality and non-disparagement provisions in severance agreements offered to furloughed employees violated Sections 7 and 8(a)(1) of the National Labor Relations Act.
Section 7 of the Act guarantees employees “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) makes it an unfair labor practice for an employer to “interfere with, restrain, or coerce employees in the exercise of rights guaranteed in Section 7” of the Act.
In the case before the Board, McLaren Macomb, the employer permanently furloughed 11 employees and presented each of them a “Severance Agreement, Waiver and Release.” The agreement conditioned the payment of severance on the employees’ release of any claims arising out of their employment and their agreement not to disclose the terms of the agreement or to make statements which could disparage or harm the image of the employer. The Board declared the later two provisions violated Sections 7 and 8(a)(1).
The Board pointed to prior decisions holding that “agreements between employers and employees that restrict employees from engaging in activity protected by the Act, or from filing unfair labor practice charges with the Board, assisting other employees in doing so, or assisting the Board’s investigative process, have been consistently deemed unlawful.”
The Board went on to find that the confidentiality and non-disparagement provisions of the severance agreement “interfere with, restrain, or coerce employees’ exercise of Section 7 rights.” Further, because “the agreement conditioned receipt of the severance benefits on the employees’ acceptance of those unlawful provisions,” the employer’s mere proffer of the agreement to the employees violated Section 8(a)(1).
Notably, the decision overrules two Trump-era Board rulings finding such provisions in severance agreements to be lawful.
The Board’s decision may be appealed to a federal appellate court. Employers should monitor this issue closely, as many severance agreements are conditioned upon the same provisions at issue in McLaren Macomb. Employers should consult with labor and employment counsel when drafting severance agreements.