On February 21, 2023, the National Labor Relations Board (NLRB) overruled a Trump-era precedent in holding that employer severance agreements containing certain provisions that restrict employee rights under Section 7 of the National Relations Act (Act) are inherently unlawful, regardless of the circumstances surrounding the offer of severance.
The case, McLaren Macomb, 372 NLRB No. 58, centered on severance agreements offered to a group of unionized hospital employees whom the employer temporarily furloughed and then permanently laid off in the early months of the Covid-19 pandemic.
The Board focused on the language of the confidentiality and non-disparagement provisions contained in the severance agreements (as well as related provisions on remedies for violations of the agreements) and found that the “mere proffer” of the agreements to employees violated Section 8(a)(1) of the Act. Specifically, the Board contended that the confidentiality and non-disparagement provisions broadly prevented employees from revealing and discussing the terms of the severance agreements themselves, as well as the terms and conditions of their employment more generally. Consequently, the Board concluded that the severance agreements inherently interfered with the Section 7 rights of employees to engage in protected concerted activity related to the terms of conditions of employment and from sharing information with the NLRB.
To be clear, the Board's ruling in McLaren Macomb is a direct attack on the validity of language commonly found in employer severance agreements. The decision will certainly be challenged in the federal courts of appeal, and its staying power – like many Board precedents before it – is an open question. It is also worth noting that McLaren Macomb only applies to severance agreements with employees covered by the Act – which does not include managers or supervisors (with limited exceptions), public employees, guards, independent contractors, and agricultural workers. That said, employers should contact counsel to determine how, if at all, McLaren Macomb may impact their use of severance agreements and other similar agreements or policies containing non-disparagement, confidentiality, and other similar provisions.
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