The National Labor Relations Board (“NLRB”) ruled this week in the McLaren Macomb case, a decision applicable to both non-unionized and unionized employers, that merely including standard confidentiality and non-disparagement provisions in a severance agreement violates the National Labor Relations Act (the “Act”).  The new Biden administration Board found that such provisions “interfere with, restrain, or coerce employees’ exercise” of rights under Section 7 of the Act, which protects organization, joining a union, and “other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” McLaren Macomb reverses Trump-era precedent allowing the use of confidentiality and non-disparagement clauses unless the employer separately committed an unfair labor practice by engaging in conduct that demonstrated anti-union or anti-organizing animus.

The McLaren Macomb hospital permanently furloughed eleven unionized employees during the Covid-19 pandemic. It presented the employees with a “Severance Agreement, Waiver and Release,” by which it offered to pay certain sums upon their execution of the document. The agreement released the employer from claims arising out of employment or termination of employment, proscribed disparagement of the employer, and required confidentiality as to the agreement’s terms.

The NLRB held that the mere proffer of a severance agreement having a “reasonable tendency to interfere with, restrain, or coerce employees in the exercise of their Section 7 rights” violates the Act, regardless of whether the employee signs the agreement or other prohibited employer conduct surrounds the proffer. It ruled that the lawfulness of a severance agreement centers on its facial language and is not dependent on external circumstances surrounding the agreement, such as an employer’s demonstrated animus towards Section 7 activity or the unlawful discharge of an employee.  

What should employers do in response to the McLaren Macomb ruling? That depends on a number of factors, including risk tolerance. It should be noted that executives, managers, supervisors, and independent contractors are not covered by the Act, and thus should not be impacted by McLaren Macomb. As to employees who do not manage or supervise departments or other employees, options include: using more limited confidentiality clauses that focus on trade secrets and truly proprietary documents/information; adding express disclaimers that nothing in the agreement is intended to impact rights under the Act; and eliminating non-disparagement provisions or reducing them to the type of relatively egregious conduct that the Board has deemed not protected under the Act. As to past agreements, employers have an argument that agreements made while Trump-era precedent was in effect should be immune from challenge based on McLaren Macomb.  Contact Tommy McGoey, Leon Rittenberg, Courtney Turkington, Kindall James, or Ben Parks for assistance in developing your company’s best approach to severance agreements and the issues raised by McLaren Macomb.

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