Employers of all sizes have long used severance agreements with departing employees, and it is not uncommon for those severance agreements to include provisions on non-disclosure or non-disparagement. However, under the current view of the National Labor Relations Board (NLRB), those provisions may violate the National Labor Relations Act (NLRA).
Under Section 7 of the NLRA, “[e]mployees shall 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, and shall also have the right to refrain from any or all such activities[.]” Section 8 of the NLRA further provides that an employer commits an “unfair labor practice” if the employer tries to “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7.” It is important to note that those prohibitions also apply to non-unionized employers.
Earlier this year the NLRB was presented with a case involving the furlough of 11 employees by a Michigan hospital. In connection with the furlough, the hospital offered severance packages with agreements that included broad confidentiality requirements and non-disparagement provisions. McLaren Macomb, 372 NLRB No. 58. The NLRB concluded that those provisions infringed on the employees’ Section 7 rights. (e.g., “The confidentiality provision would also prohibit the subject employee from discussing the terms of the severance agreement with his former coworkers who could find themselves in a similar predicament facing the decision whether to accept a severance agreement.”)
About a month after the NLRB issued its decision in McLaren Macomb, the NLRB’s General Counsel issued guidance (General Counsel Memorandum GC 23-05) to the NLRB Regional Offices regarding McLaren Macomb. Among other things, the General Counsel directed the Regional Offices that there is a violation of the NLRA even if the employee does not sign the severance agreement. Additionally, the decision is to be applied retroactively such that the General Counsel suggests that employers consider proactively contacting employees who signed severance agreements with overly broad provisions and advise those former employees that “the provisions are null and void and that [the employer] will not seek to enforce the agreements or pursue any penalties, monetary or otherwise, for breaches of those unlawful provisions.” On a somewhat related note, the General Counsel was clear in announcing that employers may be in violation of the NLRA even if it is the employee who requests the addition of broad confidentiality and/or non-disparagement provisions. Finally, the General Counsel opined that other severance agreement terms “such non-compete clauses; no solicitation clauses; no poaching clauses” and others, might also violate Section 7.
Severance agreements were typically viewed as a way to limit the risk of post-employment claims. While employers are still free to utilize such agreements, they must be very mindful of the current view of the NLRB. Failing to do so could actually create a claim where one did not exist before.
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If you have any questions about how the information in this article may affect you or your business, please contact Peter Richter at prichter@stroudlaw.com or (608) 257-2281 or your Stroud attorney.
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