February 23, 2023
Stroock Client Alert
By: Howard S. Lavin, Elizabeth E. DiMichele
In McLaren Macomb, 372 N.L.R.B. No. 58 (Feb. 21. 2023), the National Labor Relations Board (NLRB or Board) overturned two Trump-era NLRB decisions and found that simply proffering severance agreements with overbroad non-disparagement and confidentiality language in and of itself is an independent violation of the National Labor Relations Act (NLRA or the Act)—regardless of the surrounding circumstances. In doing so, the current Biden-NLRB stated that it returned to the prior, well-established principle that a severance agreement is unlawful if its terms have a reasonable tendency to interfere with, restrain, or coerce employees in the exercise of their Section 7 rights under the NLRA.
Underlying Facts
McLaren Macomb, a unionized hospital, laid off 11 employees during the COVID-19 pandemic. In connection with the layoff, McLaren Macomb offered these employees severance if they entered into McLaren Macomb’s separation agreement which, among other terms, included the following confidentiality and non-disparagement provisions:
6. Confidentiality Agreement. The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than a spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.
7. Non-Disclosure. At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.
Section 7 Rights
Under Section 7 of the NLRA, employees within the meaning of Section 2(3) of the Act (statutory employees) have the right to join a union, bargain collectively through representatives of their own choosing, and engage in other protected concerted activities. The right to engage in protected concerted activities applies to all statutory employees—whether or not unionized— to discuss or participate in group activities to address issues of workplace concern, such as discussing salary, bonuses, benefits and work conditions, and publicize workplace disputes or issues, such as safety and discrimination or harassment. Although managers and most supervisors do not have Section 7 rights, the majority of workers have these rights.
The McLaren Macomb Board’s Analysis
The NLRB concluded that the non-disparagement provision on its face substantially interfered with employees’ Section 7 rights, reasoning that public statements by employees about the workplace are central to the exercise of employee rights under the Act. The Board added that the broad non-disparagement provision prohibits employees from making any “statements to [McLaren Macomb’s] employees or to the general public which could disparage or harm the image of [McLaren Macomb]”—including, it would seem, any statement (i) asserting that McLaren Macomb had violated the Act or (ii) addressing conduct about any labor issue, dispute, or term and condition of employment involving McLaren Macomb.
The Board also took issue with the scope of the ban, highlighting that it had no temporal limitation but applied “[a]t all times hereafter” and covered statements about McLaren Macomb and “its parents and affiliated entities and their officers, directors, employees, agents and representatives.” According to the Board, these restrictions could chill efforts to assist co-workers, 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, for fear of violating the general proscription against disparagement.
The Board reached the same conclusion with respect to the confidentiality provision. The provision broadly prohibits the employees from disclosing the terms of the agreement “to any third person.” As a result, the Board determined that employees were precluded from disclosing even the existence of an unlawful provision contained in the agreement, thereby tending to coerce them from filing an unfair labor practice charge or assisting with a Board investigation into McLaren Macomb’s use of the severance agreement, including the non-disparagement provision. The confidentiality provision would also prohibit the employees from discussing the terms of the severance agreement with their union or former co-workers who could find themselves in a similar situation in the future.
Going Forward Although somewhat of an oversimplification, the McLaren Macomb decision signals the continuation of a return to Obama-era NLRB practice where the Board closely scrutinized virtually all employer policies, such as those covering social media, contact with media, non-disparagement, confidentiality and non-disclosure, and restrictions on logos and trademarks, to determine whether employees could reasonably construe the policy to prohibit Section 7 activity.
The Board’s decision did not provide much guidance regarding how employers could narrow their confidentiality and non-disparagement provisions to pass muster under the NLRB’s McLaren Macomb standard. That likely will happen in the coming months when the Board’s General Counsel—if past practice is followed—issues a memorandum giving examples of lawful and unlawful clauses.
In the meantime, companies should review their separation agreements to determine whether to make changes based on the McLaren Macomb decision. For example, in separation agreements to be signed by statutory employees, employers should consider deleting clauses broadly prohibiting the disclosure or discussion of the terms or existence of those agreements. Again, for statutory employees, companies might narrow their non-disparagement restrictions only to bar disparaging the company’s goods, services and/or products and the reputation, goodwill or interests of the company’s customers, along with adding disclaimers clarifying that statutory employees may engage in Section 7 activities.
February 23, 2023
Stroock Client Alert
By: Howard S. Lavin, Elizabeth E. DiMichele
In McLaren Macomb, 372 N.L.R.B. No. 58 (Feb. 21. 2023), the National Labor Relations Board (NLRB or Board) overturned two Trump-era NLRB decisions and found that simply proffering severance agreements with overbroad non-disparagement and confidentiality language in and of itself is an independent violation of the National Labor Relations Act (NLRA or the Act)—regardless of the surrounding circumstances. In doing so, the current Biden-NLRB stated that it returned to the prior, well-established principle that a severance agreement is unlawful if its terms have a reasonable tendency to interfere with, restrain, or coerce employees in the exercise of their Section 7 rights under the NLRA.
Underlying Facts
McLaren Macomb, a unionized hospital, laid off 11 employees during the COVID-19 pandemic. In connection with the layoff, McLaren Macomb offered these employees severance if they entered into McLaren Macomb’s separation agreement which, among other terms, included the following confidentiality and non-disparagement provisions:
6. Confidentiality Agreement. The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than a spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.
7. Non-Disclosure. At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.
Section 7 Rights
Under Section 7 of the NLRA, employees within the meaning of Section 2(3) of the Act (statutory employees) have the right to join a union, bargain collectively through representatives of their own choosing, and engage in other protected concerted activities. The right to engage in protected concerted activities applies to all statutory employees—whether or not unionized— to discuss or participate in group activities to address issues of workplace concern, such as discussing salary, bonuses, benefits and work conditions, and publicize workplace disputes or issues, such as safety and discrimination or harassment. Although managers and most supervisors do not have Section 7 rights, the majority of workers have these rights.
The McLaren Macomb Board’s Analysis
The NLRB concluded that the non-disparagement provision on its face substantially interfered with employees’ Section 7 rights, reasoning that public statements by employees about the workplace are central to the exercise of employee rights under the Act. The Board added that the broad non-disparagement provision prohibits employees from making any “statements to [McLaren Macomb’s] employees or to the general public which could disparage or harm the image of [McLaren Macomb]”—including, it would seem, any statement (i) asserting that McLaren Macomb had violated the Act or (ii) addressing conduct about any labor issue, dispute, or term and condition of employment involving McLaren Macomb.
The Board also took issue with the scope of the ban, highlighting that it had no temporal limitation but applied “[a]t all times hereafter” and covered statements about McLaren Macomb and “its parents and affiliated entities and their officers, directors, employees, agents and representatives.” According to the Board, these restrictions could chill efforts to assist co-workers, 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, for fear of violating the general proscription against disparagement.
The Board reached the same conclusion with respect to the confidentiality provision. The provision broadly prohibits the employees from disclosing the terms of the agreement “to any third person.” As a result, the Board determined that employees were precluded from disclosing even the existence of an unlawful provision contained in the agreement, thereby tending to coerce them from filing an unfair labor practice charge or assisting with a Board investigation into McLaren Macomb’s use of the severance agreement, including the non-disparagement provision. The confidentiality provision would also prohibit the employees from discussing the terms of the severance agreement with their union or former co-workers who could find themselves in a similar situation in the future.
Going Forward Although somewhat of an oversimplification, the McLaren Macomb decision signals the continuation of a return to Obama-era NLRB practice where the Board closely scrutinized virtually all employer policies, such as those covering social media, contact with media, non-disparagement, confidentiality and non-disclosure, and restrictions on logos and trademarks, to determine whether employees could reasonably construe the policy to prohibit Section 7 activity.
The Board’s decision did not provide much guidance regarding how employers could narrow their confidentiality and non-disparagement provisions to pass muster under the NLRB’s McLaren Macomb standard. That likely will happen in the coming months when the Board’s General Counsel—if past practice is followed—issues a memorandum giving examples of lawful and unlawful clauses.
In the meantime, companies should review their separation agreements to determine whether to make changes based on the McLaren Macomb decision. For example, in separation agreements to be signed by statutory employees, employers should consider deleting clauses broadly prohibiting the disclosure or discussion of the terms or existence of those agreements. Again, for statutory employees, companies might narrow their non-disparagement restrictions only to bar disparaging the company’s goods, services and/or products and the reputation, goodwill or interests of the company’s customers, along with adding disclaimers clarifying that statutory employees may engage in Section 7 activities.
