NLRB Nixes Confidentiality and Disparagement Clauses in Employment Agreements as a Result of a Recent Court Decision

On February 21, 2023, the National Labor Relations Board (NLRB) held that employers may no longer offer severance agreements with broad confidentiality and non-disparagement clauses to union and non-union employees who are covered by the National Labor Relations Act (NLRA). This recent decision reverses two previous NLRB decisions in 2020 concerning confidentiality and non-disparagement provisions in employment agreements. The decision takes place against a background of increasing legal scrutiny of employment contracts and severance agreements, including non-compete and other restrictive clauses. This leaves employers and employees searching for guidance about what is permitted and enforceable under state and federal law.

Our Employment Lawyers Help Employers and Employees Navigate the Shifting Currents of Employment Law

The Texas employment lawyers at Kilgore Law will help you navigate this evolving legal landscape. Click here to learn more about our legal work employment lawyers. We have been following developments at the NLRB for years, as you can read here NLRB. To get the conversation started about your situation, click on this link to submit your contact information Contact Kilgore & Kilgore.

Covid-19 Layoffs at McLaren Macomb Hospital in Michigan and Related Employment Agreements

Local 40 RN Staff Council, Office of Professional Employees International Union, was the exclusive bargaining representative of roughly 350 employees at McLaren Macomb Hospital in Mt. Clemens, Michigan. In 2020, the hospital permanently furloughed 11 bargaining unit employees in response to the Covid-19 emergency, which forced it to terminate outpatient services. The hospital presented each of the 11 employees with a Severance Agreement, Waiver and Release that offered to pay differing severance amounts to each furloughed employee if they signed it.

Employee Rights Were Restricted by Confidentiality and Non-Disparagement Clauses

The severance agreement in this case included substantial monetary and behavior-restricting sanctions against the employees in the event the non-disparagement and confidentiality clauses were breached. It required these employees to release the hospital from any claims arising out of their employment or termination of employment. It also required these employees to not:

  • disclose the terms of the agreement (with certain limited exceptions); and
  • make statements that might “disparage or harm the image of Employer, its parent and
    affiliated entities and their officers, directors, employees, agents and representatives.”

NLRA Violations

Section 7 of the NLRA guarantees employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” as well as the right “to refrain from any or all such activities.” Section 8(a)(1) of the NLRA makes it an unfair labor practice for an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7.” Together, the two sections protect employees who engage in communications with a wide range of third parties in circumstances where the communication is related to a labor dispute and when the communication is not disloyal, reckless, or maliciously untrue.

The McClaren Macomb Hospital Severance Agreement

The NLRB found that these severance agreements violated Section 8(a)(1) of the NLRA because they required employees to forfeit rights guaranteed and protected under Section 7. It further found that the terms of the agreement and potential financial sanctions were onerous and coercive. The mere offer of the severance agreement violated the law as an attempt to deter employees from exercising their statutory rights. The finding of coercion is central to the decision.

Advice of an Experienced Employment Lawyer

This latest decision of the NLRB explicitly overrules two of its previous decisions in 2020, involving Baylor University Medical Center and IGT dba International Game Technology. In those cases, the NLRB held that merely offering severance agreements did not violate the law because the action was not “coercive.” Those two rulings, according to the NLRB, “abandoned prior precedent in finding that offering similar severance agreements to employees was not unlawful, by itself.” This latest decision, McLaren Macomb, is likely to be challenged in further litigation. Now, however, employers should seek further guidance from employment lawyers. Workers who believe that they were effectively forced into giving up legally guaranteed rights may want to re-open old severance agreements and confidentiality agreements. One striking feature of McLaren Macomb is that it applies to both union and non-union employees.

Time to Review Your Severance Agreements, Confidentiality Agreements, and Employment Agreements

With these new developments, employers and employees should review non-disparagement and confidentiality provisions in severance agreements to ensure that they are narrowly tailored. For employers, it would be good to review the population of employees to whom such agreements are offered in your company. Are these prohibitions necessary or effective to protect an essential business interest? Do they apply only to employees who are not subject to the NLRA? Are they limited in time or geographical areas, as non-compete agreements frequently are? Can any perceived flaws in existing agreements be remedied with disclaimer language that specifically refers to the NLRA? The advice of an experienced employment attorney can be very valuable.

Kilgore Employment Lawyers Can Review Your Employment Agreements

Employers who offer, and employees who are subject to, restrictive provisions in severance agreements would be well-advised to seek advice concerning their enforceability and any potential liability that might arise from overly broad restrictions. Employees should also review their agreements given this recent NLRB ruling. For an evaluation of your situation, reach out to our employment lawyers by clicking on this link and submitting your contact information Contact Kilgore & Kilgore.

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