On Tuesday, the National Labor Relations Board held that a hospital employer violated the NLRA in 2020 by offering laid off non-supervisory employees a separation agreement which, among other things, prohibited them from disparaging or making statements that harm the reputation of the employer. McLaren Macomb, Case 07–CA– 263041 (2-21-23). The Board is returning to a legal standard where “unlawful provisions in a severance agreement proffered to employees have a reasonable tendency to interfere with, restrain, or coerce the exercise of employee rights under Section 7 of the Act.” More broadly, “an employer violates Section 8(a)(1) of the Act when it proffers a severance agreement with provisions that would restrict employees’ exercise of their NLRA rights.” The Board expanded its analysis by including within this prohibition clauses which require employees to keep confidential the terms of the separation agreement where the only exceptions were for tax advisors, attorneys, spouses and when compelled by law. “A severance agreement is unlawful if it precludes an employee from assisting coworkers with workplace issues concerning their employer, and from communicating with others, including a union, and the Board, about his employment.” This is not a case where the confidentiality clause also carved out statutory rights, such as reporting to or cooperating with government agencies.
According to the Board’s opinion, the employer temporarily laid
off 11 non-supervisory/management employees when the government restricted medical services during the
COVID pandemic. Without first informing or
negotiating with the union, the employer later made those layoffs permanent and
offered severance agreements which provided severance pay in return for a
release of claims, etc. and promises to not disparage the hospital and to keep
confidential the terms of the agreements:
6. Confidentiality Agreement. The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.
7. Non-Disclosure. At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees 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.
The Agreements also made the employees liable for injunctive
relief, attorneys’ fees and damages if they violated the provisions. The Board had no difficulty finding the
employer violated the NLRA by failing to first inform or negotiate with the
union about the layoffs and severance agreements. However, the Board also found that the
agreements themselves violated the NLRA.
Relying almost exclusively on prior Board precedent that
employees may not waive their Section 7 rights and cases which addressed
whether employers could interfere with employees’ rights to report allegations
to the Board or to assist other employees in asserting their Section 7 rights,
then Board then asserts that the confidentiality provision would prevent
employees from reporting the employer’s alleged misconduct to the NLRB:
The provision broadly prohibits the subject employee from disclosing the terms of the agreement “to any third person.” . . . The employee is thus precluded from disclosing even the existence of an unlawful provision contained in the agreement. This proscription would reasonably tend to coerce the employee from filing an unfair labor practice charge or assisting a Board investigation into the Respondent’s use of the severance agreement, including the nondisparagement provision. Such a broad surrender of Section 7 rights contravenes established public policy that all persons with knowledge of unfair labor practices should be free from coercion in cooperating with the Board. The confidentiality provision has an impermissible chilling tendency on the Section 7 rights of all employees because it bars the subject employee from providing information to the Board concerning the Respondent’s unlawful interference with other employees’ statutory rights.
. . .
The confidentiality provision would also prohibit the subject employee from discussing the terms of the severance agreement with his former coworkers who could find themselves in a similar predicament facing the decision whether to accept a severance agreement. In this manner, the confidentiality provision impairs the rights of the subject employee’s former coworkers to call upon him for support in comparable circumstances. Additionally encompassed by the confidentiality provision is discussion with the Union concerning the terms of the agreement, or such discussion with a union representing employees where the subject employee may gain subsequent employment, or alternatively seek to participate in organizing, or discussion with future co-workers. A severance agreement is unlawful if it precludes an employee from assisting coworkers with workplace issues concerning their employer, and from communicating with others, including a union, and the Board, about his employment. Id. Conditioning the benefits under a severance agreement on the forfeiture of statutory rights plainly has a reasonable tendency to interfere with, restrain, or coerce the exercise of those rights. unless it is narrowly tailored to respect the range of those rights. (bolding added for emphasis).
There is no discussion in the case whether the agreements
also provided that the confidentiality provision would not
apply to prevent the employee from reporting or cooperating with any law
enforcement or government agency, including, for instance, the NLRA or EEOC or
SEC, etc. Rather, the Board notes that: “The
only exceptions are disclosure to spouse, for obtaining legal counsel or tax
advice, or if compelled to do so by a court or administrative agency.”
Section 7 rights are not limited to discussions with coworkers, as they do not depend on the existence of an employment relationship between the employee and the employer, and the Board has repeatedly affirmed that such rights extend to former employees. It is further long-established that Section 7 protections extend to employee efforts to improve terms and conditions of employment or otherwise improve their lot as employees through channels outside the immediate employee - employer relationship . . . These channels include administrative, judicial, legislative, and political forums, newspapers, the media, social media, and communications to the public that are part of and related to an ongoing labor dispute. Accordingly, Section 7 affords protection for employees who engage in communications with a wide range of third parties in circumstances where the communication is related to an ongoing labor dispute and when the communication is not so disloyal, reckless, or maliciously untrue to lose the Act's protection.
. . .
. . . Where an agreement unlawfully conditions receipt of severance benefits on the forfeiture of statutory rights, the mere proffer of the agreement itself violates the Act, because it has a reasonable tendency to interfere with or restrain the prospective exercise of Section 7 rights, both by the separating employee and those who remain employed. Whether the employee accepts the agreement is immaterial. . . .
The nondisparagement provision on its face substantially interferes with employees’ Section 7 rights. Public statements by employees about the workplace are central to the exercise of employee rights under the Act. Yet the broad provision at issue here prohibits the employee from making any “statements to [the] Employer’s employees or to the general public which could disparage or harm the image of [the] Employer”—including, it would seem, any statement asserting that the Respondent had violated the Act (as by, for example, proffering a settlement agreement with unlawful provisions). This far-reaching proscription—which is not even limited to matters regarding past employment with the Respondent . . .
The Board also ordered the employer to “compensate the
employees for any other direct or foreseeable pecuniary harms incurred as a
result of the unlawful furloughs, including reasonable search-for-work and
interim employment expenses, if any, regard[1]less
of whether these expenses exceed interim earnings. Compensation for these harms
shall be calculated separately from taxable net backpay . . .”
NOTICE: This summary is designed merely to inform and alert
you of recent legal developments. It does not constitute legal advice and does
not apply to any particular situation because different facts could lead to
different results. Information here can change or be amended without notice.
Readers should not act upon this information without legal advice. If you have
any questions about anything you have read, you should consult with or retain
an employment attorney.
