Inside of a filing cabinet with green folders and focus on confidential label
For the vast majority of workers, getting fired is an unpleasant experience. The bad feelings that come during this time are sometimes mitigated with news that the worker may receive severance pay and perhaps other benefits. But to receive these benefits, the worker sometimes has to agree to certain conditions. These conditions will often be set out in a severance agreement.
The National Labor Relations Board recently announced a decision that limits what employers can put in these severance agreements. These limitations relate to confidentiality and non-disclosure provisions and should make it easier for workers to take collective action and exercise their rights under the National Labor Relations Act.
What Is the National Labor Relations Act?
The National Labor Relations Act of 1935 is a federal law that allows most non-managerial private sector employees to take collective action to improve their working conditions. These rights include forming unions and discussing working conditions with other workers, such as talking about pay and workplace safety.
The NLRB is an independent federal agency that enforces the NLRA. Some of this enforcement takes place with the help of a five-member Board, which decides cases concerning disputes about the NLRA.
Many of these disputes relate to Sections 7 and 8 of the NLRA. Section 7 discusses what rights workers have while Section 8(a) focuses on things an employer might do to violate Section 7.
After taking a look at Sections 7 and 8 of the NLRA, it’s easy to see how broadly those provisions have been written. This means employers need guidance to know exactly what’s allowed or prohibited under the NLRA.
For example, imagine an employee gets fired and the employer offers a severance agreement to that employee. The severance agreement states that in return for a monetary payment, the employee must promise not to talk about what happened while working for the employer. The employee must also not make any negative statements about the employer or reveal the terms of the severance agreement. Could those conditions be a violation of the NLRA? Yes, according to a recent NLRB decision.
The McLaren Macomb Decision
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According to the facts as set out in the NLRB decision, McLaren Macomb operates a hospital that was required to limit its outpatient and elective medical procedures because of the coronavirus pandemic. This meant it had to lay off some of its staff. Eleven of these laid-off employees were offered severance payments in return for signing severance agreements.
Each severance agreement contained a confidentiality agreement and a non-disclosure provision. The non-disclosure agreement was written so broadly that the employee was effectively barred from talking about anything that related to the employee’s time at McLaren Macomb, including saying something that could disparage or harm the image of McLaren Macomb.
The main issue in this case was whether the severance agreements offered to the 11 employees violated the NLRA. Specifically, whether the confidentiality and non-disclosure provisions could prevent the employees from exercising their Section 7 rights.
The NLRB concluded that the severance agreements signed by the 11 employees violated the NLRA. The NLRB also concluded that this violation could exist even if the 11 employees didn’t sign the agreements.
The NLRB stated that simply asking the 11 employees to sign the severance agreements could be an NLRA violation because the improper confidentiality and non-disclosure provisions had a reasonable chance of coercing the employees into not utilizing their rights under Section 7.
This conclusion wasn’t groundbreaking. The McLaren Macomb decision overruled two NLRB decisions from 2020 which largely permitted the use of broadly written confidentiality and non-disclosure provisions in severance agreements. These two 2020 decisions were groundbreaking because they reversed longstanding precedent that said severance agreements couldn’t ask employees to waive rights provided by the NLRA.
How the McLaren Macomb Decision Can Help Workers
This NLRB decision helps employees because it not only voids many confidentiality and non-disclosure provisions in severance agreements, but also bars employers from asking employees to sign these types of severance agreements.
This is important because some employers try to control their employees with subtle threats that they know the vast majority of employees won’t try to challenge. For instance, some employers might try to tell employees they’re subject to a non-compete agreement that wasn’t signed or isn’t enforceable.
Yet employers know many employees won’t take the risk of starting a new job they think might violate this purported contract. This is one reason why the Federal Trade Commission has proposed a rule that would not only ban the use of non-competes, but also make it unlawful for an employer to tell an employee they’re subject to a non-compete without a good faith basis for making that assertion.
Another benefit of the NLRB decision applies to scenarios where an employer has a reasonable reason to limit what a departing employee can talk about. In these uncommon situations, the contractual language must be narrowly tailored to the employer’s reasonable objectives. In other words, employers can’t use overly broad language that would keep employees from saying things they might otherwise be legally allowed to say.
Limitations of the McLaren Macomb Decision
The above-discussed benefits aren’t without some potential concerns for workers. For example, it could lead to smaller (or no) severance benefits. This will be especially true if the employee who was just fired has no realistic legal claims against the employer.
If the employer doesn’t need the employee to sign a legal release, and confidentiality and non-disclosure provisions are banned, there are fewer reasons for the employer to give the employee severance pay.
Another limitation of this decision is that it will have little to no effect on supervisors or managers. This is because the NLRA doesn’t apply to these types of employees.
It should also be mentioned that not all employees are going to value the fact that they can avoid a non-disclosure agreement. One reason is that some employees feel they have nothing to tell the rest of the world.
Another reason is that if they do want to share with others what happened at work, they often only plan on telling close friends and/or family members. While telling a close family member or friend can potentially be a violation of a non-disclosure agreement, most employers won’t sue the employee if that happens.
What employers are more worried about is the lone employee using social media to tell anyone who will listen what happened to them and that social media post going viral. Social media can be a great equalizer when it comes to a single employee taking on a powerful employer.
Then there are situations where the recently fired employee has something they want to share with the world and the employer wants to stop it. For instance, the employee might have been the victim of sexual harassment by a well-known individual and the employer is willing to offer a sizeable amount of money for the employee’s silence.
For some employees, this is a worthy trade, although the NLRB decision could make such agreements more difficult to arrange. For employees where no amount of money will be enough to stay quiet, the NLRB decision will be appreciated.
It should be noted that the NLRB decision doesn’t mean employees can say anything they want about their employer and claim it’s protected speech. The NLRA doesn’t protect speech relating to collective action or concerted activity if it’s said in a way that’s “disloyal, reckless, or maliciously untrue.”
Finally, even though a broadly written non-disclosure or non-disparagement clause might be unenforceable in a severance agreement under the NLRA, they could be allowed if either provision is narrowly written to restrict the employee’s speech to limited situations and topics.
Bottom Line
The McLaren Macomb decision makes it easier for recently terminated workers to talk freely about what happened to them at their job. It also tells employers and their lawyers that the NLRB will have a more worker-friendly interpretation of the NLRA, at least compared to the time under the prior White House administration.
