Employers can’t offer severance agreements with nondisclosure clauses, NLRB says

Members of the National Labor Relations Board speak at the American Bar Association’s Section of Labor and Employment Law 2023 conference on Nov. 10, 2022, at the Marriott Marquis in Washington, D.C. Ryan Golden/HR Dive

A Michigan hospital violated the National Labor Relations Act when it offered a severance agreement to permanently furloughed employees that prohibited them from making statements that could disparage or harm the image of the hospital and from disclosing the agreement’s terms, the National Labor Relations Board held in a 3-1 decision Tuesday.

In March 2020, as the COVID-19 pandemic disrupted operations, McLaren Macomb Hospital issued temporary furloughs to 11 union-member employees before permanently furloughing them in June of the same year, the Board said.

McLaren Macomb offered the employees severance agreements that included a nondisclosure clause which required employees to agree not to “disclose information, knowledge or materials of a confidential, privileged, or proprietary nature” and not to “make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.”

But these restrictions violated Section 8 of the NLRA because they unlawfully restrained and coerced the employees’ exercise of their Section 7 rights, the majority of the Board held.



In doing so, NLRB overturned the contrary findings of an administrative law judge, who held that the severance agreement did not violate Section 8 based on a test articulated in the 2020 cases Baylor University Medical Center and International Game Technology.

In Baylor and IGT, the Board — staffed by a Republican majority — applied a test under which the “mere proffer” of severance agreements that require employees to agree to “no participation in claims,” confidentiality or nondisparagement provisions did not violate the NLRA.

The administrative law judge in McLaren Macomb applied this test to conclude the hospital’s agreements did not violate the NLRA, but the now-Democratic majority NLRB reversed, holding that the Board’s precedent set in Baylor and IGT is “flawed in multiple respects” and ignored prior decisions by the agency.

“The Baylor test arbitrarily adopts a two-factor analysis for finding that a severance agreement violates Section 8(a)(1) of the Act,” NLRB said Tuesday. “Whether or not employees view employer documents through the prism of Section 7 rights (a proposition questioned by the IGT majority), the Board must do so when the General Counsel issues a complaint alleging that a severance agreement violates employee Section 7 rights. Because both Baylor and the IGT majority fail this test, we overrule them.”

This article, written by Ryan Golden, appeared first on HR Dive.