Michael W. Bowling
By Michael W. Bowling
The National Labor Relations Board recently issued a decision regarding the inclusion of certain severance agreement provisions it deems to violate the National Labor Relations Act when offered to a nonmanagement employee. Employers should be familiar with the changed precedent, which can impact future severance agreements. In McLaren Macomb, the Board determined that standard confidentiality, non-disparagement and nonparticipation provisions, which are typical in most severance agreements, interfere with the ability of non-management employees to exercise their Section 7 rights.
The case in question revolved around a reduction in force conducted by Michigan-based hospital McLaren Macomb in which 11 employees were offered a severance package. Each of the agreements contained the standard severance agreement provisions, including confidentiality, non-disparagement and nonparticipation clauses, which all 11 employees signed. Following the employees’ acceptance of the severance benefits, their union filed unfair labor practice charges, alleging the severance agreement provisions were unlawful.
The NLRB agreed with the union that these provisions did interfere with the ability of workers, including current and former employees, to communicate regarding the terms and conditions of employment and to work together to alter those terms and conditions. Furthermore, the NLRB asserted that these provisions also interfered with workers’ rights to communicate using administrative, judicial, legislative, and political forums, the media, social media and communications to the public.
The precedent the case established has potential repercussions. First, if challenged, such clauses in prior severance agreements are likely not enforceable under this NLRB ruling. Second, employers have three options to consider for severance packages with nonmanagement employees going forward:
• Employers can retain their current confidentiality, non-disparagement and nonparticipation clauses with the knowledge that their ability to enforce the provisions has come under NLRB scrutiny.
• Employers can revisit their current confidentiality, non-disparagement and nonparticipation clauses, tailoring them to meet the standards set forth by the NLRB in McLaren Macomb and improving the likelihood of enforceability. Retention of these provisions should not create any issues with the overall enforceability of the agreement, so long as the agreement contains an appropriate severability clause stating that if any particular provision later be determined void or unenforceable, the remainder of the agreement remains enforceable.
• Employers can choose to remove these provisions from the severance agreements, ensuring that the NLRB’s decision will not have any impact upon the enforceability of such agreements.
President Biden promised that his Department of Labor and NLRB would be the most labor-friendly in history. The NLRB continues to deliver on that promise, as McLaren Macomb exemplifies. Staying current on additional changes sure to take place in 2023 will require employers’ vigilance, in addition to consultation with in-house human resources staff and legal counsel.
The foregoing should not be understood as, or considered a substitute for, legal advice. For specific inquiries, please contact Michael W. Bowling or another licensed attorney.
Michael W. Bowling is an attorney with Crowe & Dunlevy, crowedunlevy.com, and a member of the Labor & Employment Practice Group.