by Employers in both union and nonunion companies may find that some common clauses in their severance agreements with outgoing employees are unlawful under the National Labor Relations Act (NLRA). The National Labor Relations Board (Board) recently decided a case where an employer offered severance agreements to several furloughed employees. The agreements included clauses prohibiting the employees from making statements that could disparage the employer and from disclosing the terms of the severance agreements with anyone outside of legal or tax counsel and certain others. The Board found that the employer interfered with the employees’ rights under the NLRA by requiring them to agree to these clauses in order to get severance pay.
Section 7 of the NLRA protects the rights of workers to participate in what is considered concerted activity for the betterment of wages and other working conditions. This includes actions that amount to organizing or supporting a union. It also gives employees, union and nonunion, the right to communicate with each other to improve wages and other working conditions. Section 8(a)(1) of the NLRA prohibits an employer from interfering with an employee’s Section 7 rights. In deciding the recent case, the Board reasoned that an agreement prohibiting negative comments about the employer or limiting the sharing of information about the terms of the severance agreement with other employees interfered with the employee’s right to confer with other employees about compensation and other working conditions. The Board went further and held that even offering severance agreements with these unlawful clauses interfered with an employee’s rights.
Board decisions interpreting the NLRA affect both union and nonunion workplaces. However, NLRA protections do not cover all workers. For example, independent contractors and government employees are not protected under the NLRA. In private industry, managers and most supervisors are not protected. Severance agreements with employees who are not covered by the protections of Section 7 of the NLRA may not be affected by the Board’s decision.
It may also be possible to narrowly draft lawful nondisparagement or confidentiality clauses for agreements with employees who are protected by the NLRA. Employers should consult with their legal counsel regarding the impact of the Board decision before offering employees agreements that include nondisparagement or confidentiality clauses.
The case, McLaren Macomb, 372 NLRB No. 58 (2023), can be found on the NLRB website at https://www.nlrb.gov/cases-decisions/decisions/board-decisions.
