A recent ruling by the National Labor Relations Board (the “NLRB” or “Board”) scrutinizing common terms found in separation agreements with employees is a reminder to employers that they should not recycle an old form of an agreement without consulting counsel regarding whether the form remains valid and whether it is appropriate for use with the particular type of employee departing at that time.
On February 21, 2023, in McLaren Macomb, the NLRB held that broad non-disparagement and confidentiality provisions in separation agreements with covered employees are unlawful under the National Labor Relations Act (the “NLRA” or the “Act”), which applies to both unionized and nonunionized workforces. Specifically, the Board evaluated whether the provisions in the employer’s separation agreement that prevented the employees from disclosing the terms of the agreement or making statements that could harm the image of the employer violated the employees’ Section 7 NLRA rights. Section 7 of the NLRA allows covered employees to “engage in . . . concerted activities for the purpose of . . . mutual aid or protection.” It is an unfair labor practice (“ULP”) for an employer to “interfere with, restrain, or coerce” employees in exercising their Section 7 rights or to discharge or discriminate against covered employees for filing a ULP charge with the Board, assisting others in making a charge, or assisting the NLRB in investigating charges.
The Board has broadly interpreted Section 7 rights to include not only a right of employees to discuss the terms and conditions of their employment with one another (coworker to coworker), but also to “engage in communications with a wide range of third parties in circumstances where the communication is related to an ongoing labor dispute and when the communication is not so disloyal, reckless, or maliciously untrue to lose the Act’s protection.”
In McLaren Macomb, the NLRB held that the separation agreements at issue were unlawful because they had a reasonable tendency to interfere with, coerce, or restrain employees from freely exercising their NLRA rights, such as “assisting coworkers with workplace issues concerning their employer, and . . . communicating with others, including a union, and the Board, about [their] employment.”
According to the NLRB, the fact that an employer did not intend to or succeed in coercing an employee not to exercise the employee’s Section 7 rights is not dispositive. Instead, “it is the high potential that coercive terms in separation agreements may chill the exercise of Section 7 rights that dictates the Board’s traditional approach of viewing severance agreements requiring the forfeiture of Section 7 rights—whether accepted or merely proffered—as unlawful unless narrowly tailored.” In other words, an employer cannot defend itself from a ULP charge by simply pointing out that an employee did not accept an illegal separation agreement or that the employer had not sought to enforce illegal non-disparagement or confidentiality terms within an accepted agreement.
The decision does not specify whether a disclaimer (a/k/a savings clause) that indicates the agreement does not prohibit Section 7 or other protected activity will prevent a separation agreement with non- disparagement or confidentiality provisions from being held invalid. Given this ruling, however, employers should be careful not to require employees who are entitled to Section 7 rights to agree to broad confidentiality and non-disparagement provisions in separation agreements.
The NLRA applies to the vast majority of private-sector employers and protects both unionized and nonunionized workforces, but some workers do not have NLRA rights. For example, properly classified independent contractors and most supervisors are not protected by the NLRA. Although McLaren Macomb does not affect separation agreements with such workers, employers should bear in mind that supervisory and nonsupervisory (rank- and-file) employees have nonwaivable rights under other employment statutes and those rights must be considered while preparing separation agreements to decrease the chances the agreements will be invalidated.
Simply put, this recent opinion from the NLRB reminds employers that one size does not fit all when it comes to separation (and other) agreements with employees. The NLRB is just the most recent government agency to take the position that broad non-disparagement and confidentiality provisions in separation agreements may violate employee rights in certain circumstances. Even if the McLaren Macomb decision is reversed, government agencies, courts and employees will continue to challenge separation and other employment agreements, which is why up-to-date advice from counsel is imperative.
