Employers are barred from offering employees severance agreements that require broad waivers under the National Labor Relations Act, according to a partisan National Labor Relations Board reversing existing case precedent in McClaren Macomb 372 NLRB No.58 (Feb. 21, 2023).
The new decision holds that it is a violation of the National Labor Relations Act (“Act”) to simply offer a severance agreement requiring employees to surrender rights under the Act, the Board holding that the offer itself is an attempt to deter employees from exercising their statutory rights.
The Board’s reasoning is based upon the premise that when being presented with a severance agreement, employees may feel undue pressure to surrender rights in an effort to obtain the financial benefits of the severance package. This decision applies to all employers, whether unionized or not, and can have far-reaching ramifications if an employer is undertaking downsizing.
Obviously, this is a significant departure from employer’s previous legal right to request employees to sign agreements with non-disparagement or confidentiality agreements. It was only an unfair labor practice to specifically target employee rights or commit related unfair labor practices.
Now, there is a blanket prohibition on including non-disclosure or confidentiality terms in employee severance agreements. All employers must now avoid any such terms in severance agreements or attempt to specifically protect rights of employees under the Act. In practice, this may prove impossible to parse.
The McClaren Macomb case involved an employer-sponsored severance program that prohibited signing employees from making statements that disparage the employer and prohibited employees from disclosing terms of the underlying agreement.
The wide-ranging decision reverses two 2020 cases that found that similar severance agreements were not unlawful by themselves.
Although the decision is likely to be questioned on appeal, it may have the short-term unintended consequence of dissuading employers from any type of severance agreement.
While many employers have become accustomed to aptly responding to the decision of the Board, prudent employers may wish to seek legal advice before they initiate a severance program.