Severance Agreements

1 year ago

On February 21, 2023, the National Labor Relations Board Office of Public Affairs announced that the Board issued a decision in McLaren Macomb which held that employers could not require employees to broadly waive their rights in severance agreements under the National Labor Relations Act. This decision reversed a prior decision (Baylor University Medical Center and IGT d/b/a International Game Technology) issued in 2020. Specifically, the decision in McLaren Macomb was related to severance agreements offered to furloughed employees prohibiting them from making disparaging comments about the employer and from disclosing the terms of agreement.

The Agreement language sited, as noted in the case decision, specifically states:

“6. Confidentiality Agreement. The Employee acknowledges that the … Agreement … [is] confidential and agrees not to disclose … [it] 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. … [T]he Employee … 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 …”

The decision is based on the view that an employee may feel pressured to give up rights in order to receive the benefits of a severance package. If you don’t think this applies to you because you don’t have a unionized environment, think again. Even non-unionized employers can run afoul of the Act. Overly broad confidentiality language in handbooks or language in handbooks that restricts an employee’s ability to participate in protected concerted activities under the Act could be an issue as well.

If you aren’t sure if your practices could be affected by the National Labor Relations Act or you want to make sure your employee handbook is in order, contact us at SWHRC today!