In a move that impacts employer strategies when implementing both mass layoffs and individual terminations, the National Labor Relations Board (“Board”) recently held that an employer violates the National Labor Relations Act (“NLRA”) when it extends a severance agreement with provisions that “would restrict employees’ exercise of their NLRA rights” such as the right to discuss the terms and conditions of their employment, including wages, hours, and working conditions.
McLaren Macomb, 372 NLRB No. 58 (2023), involved a unionized hospital that downsized its workforce in response to the COVID-19 pandemic and government-issued regulations prohibiting the hospital from allowing nonessential employees to work inside the hospital. The hospital eventually furloughed 11 nonessential employees and presented them each with a severance agreement containing standard confidentiality and non-disparagement provisions. The Board found that the mere act of offering the agreement with these standard provisions was sufficient to violate the NLRA, and prohibited the hospital from offering this type of agreement in the future.
The terms at issue in the hospital’s agreement are commonplace. Typically, severance agreements include a provision limiting disclosure of the terms of the agreement, including the amount of any monetary payment. They also typically include a non-disparagement provision prohibiting statements that could disparage or harm the employer. Severance agreements may also include provisions prohibiting the disclosure of confidential information learned at work. Employers customarily include confidentiality provisions out of a concern that the payment could be viewed as a precedent in future terminations or misconstrued by third parties and perhaps seen as an admission of wrongdoing. The non-disparagement provision is typically included to avoid unwanted attention or publicity.
In the Board’s view, the general problem with these provisions is that they restrict an employee’s ability to make public statements about the workplace and could deter employees from filing unfair labor practices charges, participating in NLRB investigations, and discussing their working conditions with current or former employees and/or third parties. Because the Board found that an employer’s mere offer of a severance agreement containing these terms could violate the NLRA, the employee does not have to sign the agreement for there to be a violation.
What Does McLaren Macomb Mean for California Employers?
McLaren Macomb stands for the proposition that the “mere proffer” (i.e., offering or extending) of a severance agreement restricting a former employee’s right and ability to discuss working conditions, the terms and amount of a severance agreement, and unlawful work practices violates the NLRA.
As such, in light of McLaren Macomb, it is highly recommended that employers:
(1) Review their current severance agreements and identify any confidentiality and non-disclosure provisions.
(2) Consider omitting or limiting the extent of those provisions.
(3) Add language stating that the provisions are not intended to restrict an employee from exercising their NLRA Section 7 rights, including the right to discuss working conditions with third parties or filing a charge with the NLRB (or any similar entity including but not limited to the U.S. Equal Employment Opportunity Commission (“EEOC”) and the California Civil Rights Department (“CRD”)).
(4) Consider including a “severability provision” in the severance agreement, that is, a provision which states that if one or more provisions of the agreement are found to be unenforceable or invalid, the remaining provisions of the agreement will remain in effect.
(5) Consider the McLaren Macomb decision in any mass layoff or individual termination strategy.
(6) Consult with counsel if the monetary consideration offered in a severance agreement must be confidential.
The decision will not necessarily impact every offer of a release of claims in exchange for a monetary payment. The dispute in McClaren Macomb arose from a group economic layoff and the extension of severance agreements to the impacted group. The ruling does not expressly apply to employment agreements outside of the context of severance (e.g., agreements to resolve pending claims). However, California law currently limits non-disparagement provisions in that context.
The Board’s authority does not apply to government employees, agricultural laborers, independent contractors, workers employed by a parent or spouse, employees of air and rail carriers covered by the Railway Labor Act, and supervisors (except supervisors that have been discriminated against for refusing to violate the NLRA). Moreover, the Board’s authority does not apply to certain small businesses with limited impact on interstate commerce.