The National Labor Relations Board (NLRB or the Board) issued a decision on February 21 in McLaren Macomb (372 NLRB No. 58) overruling precedent to hold that employers may not offer employees severance agreements containing confidentiality or non-disparagement provisions. Employers, whether unionized or not, should take note of the NLRB’s new focus on restricting common language in severance agreements that the Board believes requires employees to waive their rights under the National Labor Relations Act.
Facts – McLaren’s Severance Agreement
McLaren Macomb (McLaren or the Employer) operated a hospital in Michigan where it employed union-represented service employees.  In June 2020, during the COVID-19 pandemic, McLaren permanently furloughed 11 employees responsible for greeting hospital visitors.  The Employer offered these employees a severance agreement providing for payments in exchange for a release of employment claims.  The severance agreements contained the following provisions that the NLRB General Counsel alleged were unlawful: 
Confidentiality Agreement: The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.
Non-Disclosure: At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees not to make statements to Employer’s 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 representatives.
The Board’s Decision – Focus Solely on the Terms of the Severance Agreement
The NLRB found that McLaren violated the National Labor Relations Act (NLRA or the Act) by presenting its employees a severance agreement containing confidentiality and non-disclosure provisions that restricted employees’ Section 7 rights.  Specifically, the Board held that an employer violates Section 8(a)(1) of the NLRA if it merely proffers employees a severance agreement with terms that would restrict employees’ rights to, among other things, assist coworkers or former coworkers with workplace issues and communicate with others about their employment. 
As to the non-disparagement provision, the Board found that it interfered with Section 7 rights because statements by employees about the workplace are central to the exercise of rights under the Act.  Finding that the provision had no temporal, definition, or scope limitations, the Board noted that the non-disparagement provision was not limited to employee communications that are “so disloyal, reckless or maliciously untrue,” a standard in NLRB case law for losing the protection under the Act.  The Board concluded that the non-disparagement restriction in the severance agreement could limit employees’ publicizing a labor dispute, efforts to assist other employees, and future cooperation with Board investigations and litigation. 
The Board similarly held that the confidentiality provision violated the Act because it prohibited employees’ NLRA-protected discussions related to the severance agreement with other employees, union representatives, and NLRB agents. 
In announcing this change in its precedent, the NLRB overruled cases that had focused on the circumstances under which the severance agreement was presented to employees rather than solely on the language of the agreement.  Under the new rule adopted in McLaren, regardless of the surrounding circumstances, the proffering of a severance agreement requiring the forfeiture of an employee’s NLRA rights is unlawful.  Although the Board suggested a “narrowly tailored” restriction could be lawful, prior NLRB decisions have approved severance agreements only where the release waived the signing employee’s right to pursue employment claims. 
The McLaren decision makes clear that the Board will closely scrutinize whether the language of severance agreements restricts employees’ NLRA rights. Given this decision, employers should consider the following to minimize risk when drafting such agreements:
Keep in mind that the NLRA only applies to non-supervisory roles, including most hourly and individual contributor employees, and does not cover supervisors, such as managers and executive-level roles. As such, agreements with individuals in supervisory positions are not affected by this decision.
It is unclear whether the Board’s decision applies retroactively to agreements already proffered or in place. The Board’s statute of limitations of six months would likely cut off liability for any agreements proffered outside that period regardless of retroactive applicability.
When drafting these agreements, employers should consult with an experienced labor relations attorney. Morgan Lewis has experience working with employers, both those with unionized workforces and those whose are non-union, to draft these types of agreements, taking into consideration the NLRA and other applicable laws.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following:
 McLaren, slip op. at 1.
 McLaren, slip op. at 1.
 McLaren, slip op. at 1.