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Last week, the National Labor Relations Board (“NLRB”) issued an order overruling two Trump-era decisions and finding non-disclosure and confidentiality provisions routinely used by employers in separation agreements unlawful under the National Labor Relations Act (“NLRA”).  This reversal should prompt employers to review their standard severance agreements.

The Biden NLRB’s McLaren Macomb Decision[1]

At the outset of the Covid-19 pandemic, McLaren Macomb (“the Hospital”) furloughed eleven employees and, a few months later, presented the employees with severance agreements offering payment in exchange for a release of any claims related to their employment and termination.  The Board first dispensed with the precedent relied on by the administrative judge in concluding that the severance agreements were lawful, namely Baylor University Medical Center[2] and IGT d/b/a International Game Technology.[3] In the view of the current NLRB, those decisions “fail[ed] to recognize that unlawful provisions in a severance agreement proffered to employees have a reasonable tendency to interfere with, restrain, or coerce the exercise of employee rights under Section 7” of the NLRA.

Turning to the agreement at hand, the Board considered the non-disclosure provision, wherein the employee agreed, “[a]t all times hereafter, …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 concluded that this broad language, lack of any temporal limitation, and extension to parent or affiliated companies would prevent, inter alia, an employee from criticizing employer policies or practices and from cooperating fully with any NLRB investigation.  Similarly, the confidentiality provision in the agreement would prohibit the employee from disclosing the contents of the agreement to anyone other than their spouse, or as needed to obtain financial or legal advice, thus unlawfully preventing the employee from discussing the terms of the agreement with former coworkers or the union in violation of Section 8(a)(1) of the NLRA.

Considerations for Enforcement

The NLRB also concluded that the Hospital committed an unfair labor practice by even presenting the furloughed employees with the agreement, explaining that “[w]here an agreement unlawfully conditions receipt of severance benefits on the forfeiture of statutory rights, the mere proffer of the agreement itself violates the [NLRA], because it has a reasonable tendency to interfere with or restrain the prospective exercise of Section 7 rights, both by the separating employee and those who remain employed.”  Enforcement of severance agreements containing provisions prohibited under McLaren Macomb, therefore, carries a risk of an unfair labor practice charge.

Back to the Drawing Board

To be sure, employers can still offer severance payments in return for employee guarantees that are beneficial to the company or reduce risk of litigation.  But the McLaren Macomb decision should certainly trigger a reevaluation of any non-disclosure and confidentiality provisions that include the sweeping prohibitions rejected by the Board.  Likewise, severance agreements may benefit from a disclaimer that the provisions do not infringe upon any of the employee’s rights under the NLRA.

Finally, just as we cautioned during the last change of administration in 2016, both unionized and non-unionized companies should be prepared for more reversals of prior NLRB decisions. NLRB General Counsel Jennifer Abruzzo has continued to signal plans to challenge Trump-era decisions,  including SuperShuttle DFW, Inc.,[4] which returned to an employer-friendly common-law test for determining classification of workers as employees or independent contractors and Caesars Entertainment d/b/a Rio All-Suites Hotel and Casino,[5] which revived an employer’s right to restrict employee use of its computer and email systems for nonwork purposes.

[1] McLaren Macomb, 372 NLRB No. 58 (2023).

[2] 369 NLRB No. 43 (2020).

[3] 370 NLRB No. 50 (2020).

[4] 367 NLRB No. 75 (2019).

[5] 368 NLRB No. 143 (2019).