It’s Time to Re-Think Your Severance Agreements
Posted by chapteradmin on Mar. 1, 2023 / Legal Updates / Subscribe 0
By Melissa Tetreau, Bodman PLC
The McLaren Macomb Decision
On February 21, 2023, the National Labor Relations Board (“NLRB”) issued its decision in McLaren Macomb (Case 07-CA-263041). In that case, the employer permanently furloughed eleven employees and presented each of them with a “Severance Agreement, Waiver and Release.” The severance agreements contained standard provisions that broadly prohibited the employees from making oral or written statements that disparage the company or from disclosing the terms of their severance agreement.
When reviewing the terms of the agreements, the NLRB found that the non-disparagement and confidentiality provisions unlawfully restrained employees from exercising their right to engage in protected activity. For instance, a furloughed employee complaining about wages at McLaren Macomb may be in breach of the non-disparagement provision even though Section 7 of the National Labor Relations Act (“NLRA”) protects an employee’s right to make these complaints. After review, the NLRB reverted to a previous standard of analyzing the specific language of severance agreements to ensure that any relinquishment of protected rights is narrowly tailored.
What does this mean moving forward?
First, remember that not all workers have Section 7 rights. To the extent you offer severance agreements to supervisors or other employees not covered by the NLRA, you can continue to utilize the same agreements you have used in the past.
Second, the severance agreements at issue in McLaren Macomb were incredibly broad. Whether a more narrowly tailored non-disparagement provision would have been lawful remains an open question. Employees do not have the right to make defamatory, reckless, or maliciously untrue statements, and such statements likely can still be prohibited in severance agreements. If you continue to include narrow non-disparagement provisions in severance agreements, be sure to include a disclaimer that the provision is not intended to prevent employees from exercising Section 7 rights. While the disclaimer in and of itself may not be enough to make an overly broad provision lawful, it demonstrates to the employees (and the NLRB) that their rights under the NLRA are not being infringed.
Third, the McLaren Macomb decision found that provisions requiring employees to keep the terms of the agreement confidential were unlawful. Moving forward, you should work with legal counsel to weigh the risks and benefits of including a confidentiality provision.
Finally, it is unclear what effect, if any, this decision has on existing severance agreements. Again, if you are concerned about recent or existing severance agreements with broad non-disparagement and confidentiality provisions, you should consult your employment lawyer to discuss the pros and cons of retroactive compliance.
If you have questions regarding the McLaren Macomb decision or its effect on your severance agreements, reach out to Melissa Tetreau at [email protected] or your employment attorney.
Melissa Tetreau is a member of the Detroit SHRM Legal Affairs Committee and Chair of the Community & Government Relations Committee and a member at the law firm of Bodman PLC. She can be reached at [email protected].
Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information, is included in the re-post of the article. March 2023.
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