NLRB Tackles Separation Agreements

1. prohibited any statements by the subject employee asserting that the employer had violated the Act;
2. was not limited to matters regarding past employment with the employer;
3. provided no definition of disparagement that “cabins the term to [the] well-established NLRA definition”;
4. banned the subject employee’s critique of the employer’s policies, subject only to the requirement that employee’s communications “not be so ‘disloyal, reckless or maliciously untrue as to lose the Act’s protection’”
5. lacked any temporal limitation;
6. hilled “efforts to assist fellow employees, which would include future cooperation with the Board's investigation and litigation of unfair labor practices with regard to any matter arising under the NLRA at any time in the future”
7. prohibited statements also toward the employer’s “‘parents and affiliated entities and their officers, directors, employees, agents and representatives.

The Board summed up its holding with the following:

A severance agreement is unlawful if it precludes an employee from assisting coworkers with workplace issues concerning their employer, and from communicating with others, including a union, and the Board, about his employment. Conditioning the benefits under a severance agreement on the forfeiture of statutory rights plainly has a reasonable tendency to interfere with, restrain, or coerce the exercise of those rights[,] unless it is narrowly tailored to respect the range of those rights.

Employers do not necessarily need to remove confidentiality and non-disparagement provisions entirely, although some employee-side advocates will likely argue that this is necessary or prudent. Because the provisions at issue did not contain any sort of disclaimer or carveout for Section 7 rights, it is unclear whether the Board will take issue with more narrowly tailored confidentiality and non-disparagement provisions. As noted above, the Board suggested that “narrowly tailored” provisions that “respect the range of [statutory] rights” may not violate the Act. Employers should, therefore, consult with legal counsel to determine the best approach for their organization.

As employers review their separation agreements, it is important to keep in mind that the NLRB’s decision likely does not impact agreements presented to those who do not have Section 7 rights—most notably, supervisory employees. See Parker-Robb Chevrolet, 262 NLRB 402 (1982) (finding supervisor’s attendance at union meetings and complaints about the discharge of union leaders did not constitute protected Section 7 activity). The NLRA defines “supervisors” to mean “any individual having authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibly to direct them, or to adjust their grievances, or effectively to recommend such action, if in connection with the foregoing the exercise of such authority is not of a merely routine or clerical nature, but requires the use of independent judgment.”

The Board’s order arguably is not retroactive and is not self-enforcing; if the hospital does not comply voluntarily, the Board must apply to the appropriate United States Court of Appeals—here, the Sixth Circuit—for enforcement of the order. The hospital may also appeal the Board’s decision to the Sixth Circuit. Employers should, nonetheless, take steps now to comply with the Board’s decision because failing to account for it could not only constitute an unfair labor practice under the NLRA, but could also lead to the unenforceability of at least the confidentiality and/or non-disparagement provisions.¹

Lastly, we note that the McLaren decision is part of a growing trend to allow employees to discuss acts in the workplace that they believe are unlawful. In the last few years, California, Washington, and New York have passed laws that require employers to tailor agreements to account for such limitations on non-disparagement and/or confidentiality provisions. California recently passed, for example, the Silenced No More Act that took effect last year and prohibits severance agreements from including provisions that would prevent former employees from disclosing information about unlawful workplace acts except in certain circumstances. See Cal. Civ. Proc. Code § 1001; Cal. Gov’t Code § 12964.5. Washington also passed its own Silenced No More legislation, E.S.H.B. 1995, that applies to severance and employment agreements, and prohibits nondisclosure or non-disparagement provisions that restrict employees from disclosing or discussing what the employee reasonably believes constitutes a violation of public policy, discrimination, harassment, retaliation, or a wage and hour infraction. In 2019, New York passed a law that prohibits employers from requiring non-disclosure terms in agreements relating to facts and circumstances underlying discrimination claims unless confidentiality is the employee or former employee’s preference. See N.Y. Gen. Oblig. Law § 5-336. 

Next Steps

Here are a few steps you may take in light of the Board’s decision:

• Review current severance agreements to determine whether they contain broad confidentiality or non-disparagement clauses that may violate the Board's rule or recently enacted state law.
• Consider adding savings clauses that set forth the parties' mutual understanding that nothing in the severance agreement is intended to prohibit an employee's exercise of non-waivable rights under Section 7 of the NLRA.
• Consider adding severability clauses that express the parties' mutual intent to enforce the severance agreement to the maximum extent permitted under applicable law.
• Ensure that agreements comply with restrictions under applicable state law (such as California, Washington and New York as explained above).
• Review employee handbooks, pre-dispute confidentiality agreements, and written policies to determine whether they contain broad non-disparagement or confidentiality covenants that may require similar disclaimers as set forth above.<
• pre-dispute agreements between employers and their former, current, or prospective employees.

¹ Notably, even if the Sixth Circuit refuses to enforce the Board’s decision, the Board does not treat adverse Court of Appeals decisions as binding precedent and could choose to follow the decision in future proceedings regardless of the outcome in the Court of Appeals. Beverly Enters., 313 NLRB 491 (1993) (issuing an order at odds with Sixth Circuit precedent because “the Supreme Court, not [the] circuit or even all twelve circuits that have jurisdiction to review orders of the Labor Board, is the supreme arbiter of the meaning of the laws enforced by the Board.”).

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