EMPLOYER ALERT – COMMONPLACE SEVERANCE AGREEMENT CLAUSES VIOLATE LABOR LAWS, NLRB RULES
The National Labor Relations Board (NLRB or Commission) issued a decision in the McLaren Macomb case on February 21, 2023, overruling the precedent that employers may not offer employees severance agreements that contain confidentiality or non-disparagement provisions.
Employers, whether unionized or not, should take note of the NLRB's new focus on restricting common language in severance agreements that the Board believes requires employees to waive their rights under the National Labor Relations Act.
The NLRB found that McLaren violated the National Labor Relations Act (NLRA or the Act).
Specifically, the Board held that an employer violates Section 8 (a) (1) of the NLRA if it merely offers employees a severance agreement with terms that would restrict employees' rights to, among other things, assist coworkers or former coworkers with workplace issues and communicate with others about their employment.
Takeaways For Employers Following McLaren:
🔵 Removing severance provisions, such as confidentiality or non-disparagement clauses, that might be interpreted as restricting Section 7 rights. If employees cannot lawfully be restricted by a confidentiality or non-disparagement clause, employers should assess the value of including such clauses versus the risk of an unfair labor practice charge.
🔵 If a severance agreement contains clauses that might be interpreted as restricting Section 7 rights, those restrictions should be as narrow as possible and make explicit that the agreement is not intended to preclude employees from assisting coworkers or former coworkers with workplace issues concerning their employer or from communicating with others, including a union and the NLRB, about their employment.
🔵 If an employer utilizes a disclaimer in the agreement providing that nothing in the agreement will restrict employees' Section 7 rights, keep in mind that the Board views this approach with skepticism.
🔵 Make sure to include "severability" language.
🔵 Employers should review and potentially update their template agreements—not only severance agreements, but any separation or settlement agreements with employees—based on the rationale in McLaren.
Keep in mind that the NLRA only applies to non-supervisory roles, including most hourly and individual contributor employees, and does not cover supervisors, such as managers and executive-level roles. As such, agreements with individuals in supervisory positions are not affected by this decision.
This document is designed for general information only. The information presented in this document should not be construed to be formal legal or tax advice nor the formation of a lawyer/client relationship.
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