{"id":201,"date":"2023-03-29T09:11:10","date_gmt":"2023-03-29T13:11:10","guid":{"rendered":"https:\/\/www.apslaw.com\/on-the-job\/?p=201"},"modified":"2023-04-24T11:37:03","modified_gmt":"2023-04-24T15:37:03","slug":"the-end-of-an-era-separation-agreements-in-the-wake-of-mclaren-macomb-what-employers-need-to-know","status":"publish","type":"post","link":"https:\/\/www.apslaw.com\/on-the-job\/2023\/03\/29\/the-end-of-an-era-separation-agreements-in-the-wake-of-mclaren-macomb-what-employers-need-to-know\/","title":{"rendered":"The End Of An Era, Separation Agreements In The Wake Of Mclaren Macomb: What Employers Need To Know"},"content":{"rendered":"

The National Labor Relations Board\u2019s (the \u201cBoard\u201d) decision in McLaren Macomb<\/em>,[1]<\/a> significantly changes what employers are allowed to include in a departing employees\u2019 severance\/separation agreements or packages. \u00a0The Board\u2019s ruling applies irrespective of whether the employee leaves voluntarily or is terminated, and, more importantly, the Board\u2019s ruling is broad enough to apply to union and non-union employees.<\/p>\n

Before McLaren Macomb<\/em>, the Board previously determined and reiterated that employers could lawfully include confidentiality and nondisparagement provisions in severance agreements.[2]<\/a>\u00a0 For example in\u00a0Baylor University Medical Center<\/em>, the Board did not focus its attention on the contract language contained in the agreement at issue like it did in McLaren Macomb<\/em>.\u00a0 Instead, the Board previously focused its analysis on the circumstances under which the agreement was presented to employees.\u00a0 The Board concluded that a proffer of a severance agreement containing confidentiality, non-assistance and nondisparagement provisions would not interfere with rights guaranteed by the National Labor Relations Act of 1935[3]<\/a> to the extent that signing the agreement is not mandatory, the restrictions applied to post-employment activities and the employee was lawfully separated from employment and otherwise did not allege an unfair labor practice.[4]<\/a> The Board employed a similar approach in IGT d\/b\/a\/ International Game Technology<\/em>,[5]<\/a> where it cited to\u00a0Baylor<\/em>,\u00a0<\/em>and determined that a nondisparagement provision in a severance agreement was lawful where the agreement was \u201centirely voluntary, [did] not affect pay or benefits that were established as terms of employment, and [had] not been proffered coercively.\u201d[6]<\/a><\/p>\n

The Board\u2019s decision\u00a0in McLaren Macomb<\/em>, however,\u00a0<\/em>expressly overruled\u00a0Baylor<\/em>\u00a0and\u00a0IGT<\/em>. \u00a0In so doing, the Board clearly established its \u201creturn to the prior, well-established 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 the employer\u2019s proffer of such agreements to employees is unlawful.\u201d\u00a0 The Board\u2019s decision is also significant because it signals an unwillingness to enforce or accept broad severance agreements, or key provisions thereof, that would otherwise bind employees under confidentiality and\/or nondisparagement obligations.<\/p>\n

In McLaren Macomb<\/em>, a unionized teaching hospital in Michigan permanently furloughed 11 union employees. \u00a0The hospital presented the 11 union employees with a severance agreement and general release that included commonly used confidentiality and nondisparagement provisions. \u00a0The severance agreements offered to the union employees would have prohibited them, amongst other things, from making disparaging statements about their former employers and from talking about the terms of the settlements.\u00a0 On review, the Board examined the language of the severance agreement and held that the confidentiality and nondisparagement provisions contained in the agreements violated Section 8(a)(1) of the NLRA.<\/p>\n

The \u201cNon-Disclosure\u201d provision provided that the employee \u201cpromises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature\u201d known to the employee due to employment. It also included nondisparagement terms requiring that the employee \u201cagrees not to make statements to Employer\u2019s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents and representative.\u201d<\/p>\n

The \u201cConfidentiality\u201d provision provided that the employee \u201cacknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person,\u201d except to a spouse, or as necessary to legal or tax advisors or pursuant to a legal administrative order. The Board also determined that the agreement also provided the hospital with the right to pursue \u201csubstantial monetary and injunctive sanctions\u201d should an employee violate the severance agreement.<\/p>\n

The Board determined that the nondisparagement provision violated Section 8(a)(1) of the NLRA by violating employees\u2019 Section 7 rights because \u201c[p]ublic statements by employees about the workplace are central to the exercise of employee rights under the Act[.]\u201d\u00a0 The Board specifically took issue with how broad the nondisparagement provision was because it was \u201cnot even limited to matters regarding past employment with the [Hospital],\u201d and would ultimately \u201cencompass employee conduct regarding any labor issue, dispute, or term and condition of employment of the Hospital.\u201d \u00a0Furthermore, the Board noted that the provision contained no temporal limitation and similarly applied to the hospital\u2019s parents, affiliated entities and their officers, directors, employees, agents and representatives. In its holding, the Board stated that the nondisparagement clause acted as a \u201csweepingly broad bar that has a clear chilling tendency on the exercise of Section 7 rights by the subject employee.\u201d<\/p>\n

Like the nondisparagement provision, the Board found the confidentiality provision was overly broad because it prohibited employees from disclosing the terms of the agreement to \u201cany<\/em>\u00a0third person.\u201d The Board determined that the broad provision would preclude employees from \u201cdisclosing even the existence of an unlawful provision contained in the agreement,\u201d which \u201cwould reasonably tend to coerce the employee from filing an unfair labor practice charge or assisting a Board investigation into the Respondent\u2019s use of the severance agreement.\u201d \u00a0The Board further concluded that the confidentiality provision would, in practice, prohibit employees from discussing the existence or terms of the severance agreement with others, including union representatives or former coworkers who are presented with similar agreements.<\/p>\n

Effectively, the Board held that conditioning the benefits under a severance agreement on the forfeiture of statutory rights plainly has a reasonable tendency to interfere with, restrain, or coerce the exercise of those rights, unless it is narrowly tailored to respect the range of those rights.\u00a0 Thus, an employer can violate the NLRA by simply offering a severance\/separation agreement containing unlawful confidentiality and nondisparagement provisions because conditioning the receipt of benefits on the \u201cforfeiture of statutory rights plainly has a reasonable tendency to interfere with, restrain, or coerce the exercise of those rights.\u201d<\/p>\n

Under this new standard, it is unlikely that an employer will be able to mount a viable defense by claiming that it has not enforced the offending confidentiality and\/or nondisparagement clauses where the Board\u2019s holding extends unfair labor practices to include the mere offering of an agreement with offending clauses.\u00a0 While the Board hinted in a footnote that there might be a way to lawfully offer employees a \u201cnarrowly tailored\u201d severance agreement containing those clauses, it refused to explain how that could be accomplished and simply noted \u201cwe are not called on in this case to define today the meaning of a \u2018narrowly tailored\u2019 forfeiture of Section 7 rights in a severance agreement.\u201d<\/p>\n

Although the Board\u2019s new rule applies to both union and non-union employees, employers should note that it does not apply to public sector employees or individuals who are not deemed employees with Section 7 rights under the NLRA, such as executives, managers, supervisors and independent contractors.<\/p>\n

In the wake of McLaren Macomb<\/em>, employers are encouraged to review their standard agreements, specifically any nondisparagement and confidentiality provisions currently contained in those agreements, and should engage legal counsel to determine if such provisions are necessary and if so, how those provisions should be drafted to prevent a violation of Section 8(a)(1).<\/p>\n

[1]<\/a> McLaren Macomb<\/em>, 372 NLRB No. 58 (2023).<\/p>\n

[2]<\/a> Baylor University Medical Center<\/em>, 369 NLRB No. 43 (2020).<\/p>\n

[3]<\/a> 29 U.S.C. \u00a7\u00a7 151-169.<\/p>\n

[4]<\/a> Baylor University Medical Center<\/em>, 369 NLRB No. 43 (2020).<\/p>\n

[5]<\/a> IGT d\/b\/a\/ International Game Technology<\/em>, 370 NLRB No. 50 (2020).<\/p>\n

[6]<\/a> Id.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

The National Labor Relations Board\u2019s (the \u201cBoard\u201d) decision in McLaren Macomb,[1] significantly changes what employers are allowed to include in a departing employees\u2019 severance\/separation agreements or packages. \u00a0The Board\u2019s ruling applies irrespective of whether the employee leaves voluntarily or is terminated, and,…<\/p>\n","protected":false},"author":7,"featured_media":131,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7,6,3,25,62],"tags":[2,9,63],"class_list":["post-201","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-employees","category-employers","category-employment-law","category-nlrb","category-severance-agreements","tag-employees","tag-employers","tag-severance-agreements"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.apslaw.com\/on-the-job\/wp-json\/wp\/v2\/posts\/201","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.apslaw.com\/on-the-job\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.apslaw.com\/on-the-job\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.apslaw.com\/on-the-job\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/www.apslaw.com\/on-the-job\/wp-json\/wp\/v2\/comments?post=201"}],"version-history":[{"count":0,"href":"https:\/\/www.apslaw.com\/on-the-job\/wp-json\/wp\/v2\/posts\/201\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.apslaw.com\/on-the-job\/wp-json\/wp\/v2\/media\/131"}],"wp:attachment":[{"href":"https:\/\/www.apslaw.com\/on-the-job\/wp-json\/wp\/v2\/media?parent=201"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.apslaw.com\/on-the-job\/wp-json\/wp\/v2\/categories?post=201"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.apslaw.com\/on-the-job\/wp-json\/wp\/v2\/tags?post=201"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}