NLRB Holds Employers May Not Offer Severance Agreements That Require Employees to Broadly Waive NLRA Labor Rights

On February 21, 2023, the National Labor Relations Board (NLRB) issued a decision in McLaren Macomb and Local 40 Rn Staff Council, Office and Professional Employees, International Union (OPEIU), AFL-CIO, 372 NLRB No. 58, 2023 WL 2158775, in which the Board returned to long-standing precedent holding that employers may not offer employees severance agreements that require employees to waive rights under the National Labor Relations Act (NLRA). The decision concerned severance agreements offered to eleven (11) permanently furloughed employees that prohibited the employees from making statements that could disparage the employer, and from disclosing the terms of the severance agreements.

The 3-1 decision overruled the NLRB’s decisions in Baylor University Medical Center and IGT d/b/a International Game Technology from 2020, which broke from prior precedent and held that offering similar severance agreements to employees was not unlawful.

In McLaren Macomb, the NLRB held that a severance agreement is unlawful if its terms have a reasonable tendency to interfere with, restrain, or coerce employees in the exercise of their Section 7 rights, and that an employer’s proffer of such agreements to employees is unlawful. In making that determination, the NLRB stated it will examine, as pre-Baylor precedent did, the language of the agreement, including whether any relinquishment of Section 7 rights is narrowly tailored.

Members Wilcox and Prouty joined Chairman McFerrin in the decision. Member Kaplan dissented, reaching the same result but without abrogating the Baylor or IGT decisions.

The effective date of the decision is February 21, 2023. Application of the Order accompanying the McLaren Macomb decision is expressly limited to include the eleven (11) permanently furloughed employees and their collective bargaining unit, and excludes “supervisors” (i.e., managers), as defined under the NLRA. See 29 U.S.C.A. § 152. Employers are reminded that the NLRA applies with equal force to ALL employers, not just Union employers.

Employers offering severance packages with confidentiality and/or non disparagement provisions should consult with counsel in light of this critical decision.