The National Labor Relations Board (NLRB) has ruled that an employer violates Section 8(a)(1) of the National Labor Relations Act when the employer uses employee severance agreements with provisions restricting employees’ exercise of their NLRA rights. In McLaren Macomb, 372 NLRB No. 58 (Feb. 21, 2023), the Board reversed its prior decisions in Baylor University Medical Center, 369 NLRB No. 43 (2020) and IGT d/b/a Inter-national Game Technology, 370 NLRB No. 50 (2020).
In McLaren, a hospital offered a severance agreement to 11 bargaining unit employees it permanently furloughed following the onset of COVID-19. The agreement broadly prohibited them from making statements that could disparage or harm the image of the hospital, its parent and affiliated entities and their officers, directors, employees, agents and representatives, and further prohibited them from disclosing the terms of the agreement to any third person, subject to limited exceptions. The agreement also provided for penalties against the employees if they breached the non-disparagement and confidentiality terms.
In the NLRB’s prior decisions, Baylor and IGT, which now are overturned, the Board had found such non-disparagement and confidentiality provisions to be lawful, and concluded that the severance agreement was lawful and that the proffer of the agreement to the furloughed employees was lawful. In Baylor, the Board had held that the employer did not violate the Act by the “mere proffer” of a severance agreement with similar restrictive language, reasoning that the agreement was not mandatory, pertained exclusively to post-employment activities and, therefore, had no impact on terms and conditions of employment. The Board also relied on the fact that there was no allegation that anyone offered the agreement had been unlawfully discharged or that the agreement was proffered under circumstances that would tend to infringe on Section 7 rights. In IGT, the Board had dismissed an allegation that the employer maintained an unlawful nondisparagement provision in the severance agreement it offered to separated employees since the agreement was “entirely voluntary, does not affect pay or benefits that were established as terms of employment, and has not been proffered coercively.”
McLaren overrules both Baylor and IGT, and returns to the principle that a severance agreement is unlawful if its terms have a reasonable tendency to interfere with, restrain, or coerce employees in the exercise of their Section 7 rights, and that an employer’s mere proffer of such an agreement is unlawful. The NLRB held that “[a]greements that contain broad proscriptions on employee exercise of Section 7 rights have long been held unlawful because they purport to create an enforceable legal obligation to forfeit those rights. Proffers of such agreements to employee have also been held to be unlawfully coercive.” The decision criticizes Baylor, explaining that the holding there failed to consider the specific language in the challenged provisions and focused merely on the circumstances in which the agreement was presented. In doing so, the Board affirmed that Section 7 rights are not limited to discussions with coworkers, but that the Act affords protection for employees who engage in communications with a wide range of third parties.
This ruling is an opportune time for employers to review their standard severance agreements with counsel. Ballard Spahr regularly works with both unionized and non-unionized employers in preparing severance agreements so that they are compliant not only with the latest NLRB guidance but also with the other array of employment and other applicable state and federal laws.