NLRB Offers New Guidance on Recent Severance Agreement Decision: Here’s What Employers Need to Do Now

April 4, 2023

Last month, we published an article on the NLRB’s decision in McLaren Macomb Hospital where the Board reversed course on the NLRB’s prior position on interpreting severance agreements under Section 7 of the NLRA. In McLaren, the Board found violations of Section 7 in the scope and content of provisions that prohibited the separating employees from disparaging the hospital and required that they keep the severance agreement and its terms confidential. This Board held that these overbroad restrictions on the now former employees interfered with not just the employees’ own concerted actions in the workplace but also handcuffed their ability to seek the assistance of the NLRB. Additionally, the Board recognized that such provisions which silenced former employers hampered its own access to information in the Board’s investigations.

Clarifications and Considerations

As was expected, the McLaren decision raised many questions, including: what should employers do now with existing severance agreements? The General Counsel for the NLRB has responded with Memorandum GC 23-05 which attempts to clarify the Board’s decision in McLaren and affirmatively state Board policy on such agreements moving forward. The pertinent considerations are as follows:

Severance agreements are still lawful.

Employers may still use severance agreements so long as the agreement:

  • Requires an employee to release the right to pursue only those claims related to employment.
  • Requires an employee to only release those claims that exist as of the date of the agreement.
  • Maintains intact the employee’s rights to engage with other employees, including former coworkers, to improve the terms and conditions of their employment, whether that be through access to the Board, their union, judicial channels or the media.

In other words, the agreement cannot contain broad clauses that can be interpreted to restrict Section 7 rights, especially those involving the right to publicly speak about an employer and the workplace.

McLaren will not be limited to non-disparagement and confidentiality agreements.

The General Counsel advises she will be taking aim at other clauses which could interfere with Section 7 rights such as clauses relating to non-competition, non-solicitation and no poaching. Potential liability may also be found in clauses requiring an employee to cooperate with the employer in any current or future investigation or proceeding involving the employer.

McLaren is retroactive to existing severance agreements.

McLaren extends to prior severance agreements existing prior to the Feb. 21st date of that decision to the extent that they contain similar overbroad restrictions as were found in the severance agreements proffered by the hospital. Notably, the six-month statute of limitations for the NLRB to file a complaint against an employer as set forth in Section 10(b) will not apply to bar charges brought by the Board for maintaining and enforcing a previously entered severance agreement that violates Section 7. The General Counsel does not suggest an alternative limitation.

Severance agreements may still be found unlawful even if the employee does not sign it.

The proffer (the mere presentation of the agreement to the employee) in and of itself can be a violation if it coerces employees by conditioning severance benefits on the waiver of statutory rights to concerted activity.

Severance agreements provided to supervisors may also be unlawful.

Even though supervisors may not be covered generally by the National Labor Relations Act, an employer can violate Section 7 if it (i) retaliates against a supervisor who refuses to proffer an unlawful severance agreement to an employee or (ii) is himself proffered a severance agreement containing restrictions such as participating in a Board proceeding.

Former employees are also protected by Section 7.

The General Counsel advises that Section 7 rights do not depend on the existence of an employment relationship between the employee and the employer; therefore, the Board should apply Section 7 to restrictions on the activities of former employees that will circumvent the objectives of Section 7. In support of this position, she also notes that the Board depends on former employees to provide them evidence and share information on working conditions that they have experienced which is quintessential to the Board’s ability to protect current employees’ rights to mutual aid and protection under Section 7.

Employees cannot waive their Section 7 rights.

Overbroad confidentiality and non-disparagement clauses are violative and unlawful even if requested by the employees. The Board sees its role as protecting employees in the workplace environment which inherently reflects an inequality of bargaining power in favor of the employer.

A Savings Clause will not guarantee a severance agreement as lawful.

Although the General Counsel concedes that including a disclaimer in the agreement which denounces that anything therein has any intent to restrict the employee’s Section 7 right, such disclaimers could be helpful to resolve ambiguity. However, such “savings clauses” are not a panacea. The employer could still be liable for “any mixed or inconsistent messages” expressed or implied in a severance agreement that would restrict the employee’s Section 7 rights.

How Should Employers Respond?

McLaren is still subject to appeal and may be reversed. However, employers should act prophylactically and scrutinize all pending severance agreements to assure they are compliant with the Board’s decision in McLaren and the above guidance from the NLRB General Counsel. Employers should assure that there are no provisions affecting the separating employee’s rights to engage with former coworkers, the Board or others to confer on terms and conditions of his or her former working conditions. In the event a severance agreement contains provisions that may be interpreted as overbroad such that they chill Section 7 rights, such provisions shall be either redacted as null and void or rewritten as to narrowly tailor the objective of such clause to comply with Section 7. Non-disparagement clauses can be limited to statements that are defamatory; confidentiality clauses can be limited to the employer’s trade secrets and proprietary information. The former employee should be contacted to assure he or she is aware of the revision and that the employee will not be seeking to enforce the clause as previously written.

The stakes are high for employers as the NLRB appears to be targeting previous employer decisions under the former administration’s appointed Board. Please contact KJK Labor & Employment Partner Maribeth Meluch (MM@kjk.com; 614.427.5747) or any other of our partners in our Labor and Employment practice group for help navigating these issues.