NLRB Blocks Broad Severance Provisions

Applies to:          All Employers with Employees subject to NLRA

Effective:             February 21, 2023

Quick Look

• Severance agreements must be narrowly tailored not to interfere with employee NLRA rights.
• Merely offering a severance agreement with unauthorized language is itself a violation under the NLRA.

Discussion

In McLaren Macomb, the National Labor Relations Board (NLRB) reversed previous 2020 NLRB decisions in Baylor University Medical Center and IGT d/b/a International Game Technology, returning to longstanding precedent stating that employers may not offer employees severance agreements that require employees to broadly waive their rights under the National Labor Relations Act (NLRA).

The case involved severance agreements offered to furloughed employees that prohibited them from making statements that could disparage the employer and from disclosing the terms of the agreement itself. The NLRB said that these terms were overly broad because they improperly required the employees to waive their Section 7 rights under the NLRA. Going further, the NLRB stated that the severance agreement offer was itself an attempt to deter employees from exercising their statutory rights.

How does this ruling impact employers? Employers may still be able to include narrowly tailored language regarding nondisparagement if the agreement includes a disclaimer against violating Section 7 rights. However, the ability to maintain confidentiality over a severance agreement may be more difficult. The ruling specifically addressed being able to discuss the terms of the severance with other employees, the union, and the NLRB. It does not specifically state that all confidentiality is prohibited, but only to the extent it would interfere with Section 7 rights. Even with a carve out for NLRB rights, confidentiality may be hard to contain for covered workers. Keep in mind that Section 7 rights do not apply to all employees. For example, managers, most supervisors, public sector employees, and some agricultural workers are not covered by NLRA protections.

Also note that this ruling is expected to be followed up with clarifying advisory memos from the NLRB. At the very least, severance agreements will need to be carefully tailored and include disclaimer language for protection of Section 7 rights.

Action Items

1. Review the NLRB decision here.
2. Have severance agreements reviewed by legal counsel.
3. Subscribers can call our HR Hotline at (833) 268-5531 for further assistance.