NLRB: Severance Packages Can’t Buy Workers’ Silence
In a recent decision, the Board cracks down on employers who seek to silence terminated workers through coercive severance agreements.
By Percy Metcalfe
On Tuesday, February 21, 2023, the National Labor Relations Board (NLRB) issued an opinion in Mclaren Macomb making it illegal for employers to silence terminated employees with coercive severance agreements. The decision makes it a breach of the National Labor Relations Act (NLRA) for employers to offer severance agreements that prevent employees from speaking about their jobs after termination, a right that is protected under the Act.
The case addresses the legality of a severance agreement offered to 11 employees permanently furloughed by their employer, a Michigan Hospital. The agreement contained two provisions, which sought to prohibit the terminated workers from making statements that disparage or otherwise harm the image of the employer.
In two Trump-era cases, Baylor University Medical Center and IGT (International Game Technology), the then-Republican controlled Board had declared that such agreements were not facially illegal and only violated the Act if the conditions of the employee’s termination included some additional suspicious conduct by the employer, e.g., the termination was in retaliation for protected activity such as organizing a union, or the employer committed some other unfair labor practice discriminating against employees for their exercise of Section 7 rights.
The decision in Mclaren Macomb overturns these cases and returns the Board’s position to comport with longstanding precedent, under which such agreements are scrutinized on the basis of whether their language has a reasonable tendency to interfere with, restrain, or coerce employees’ exercise of their Section 7 rights.
Section 7, often referred to as “the core” of the NLRA, codifies employees’ rights to self-organize, to form, join or assist labor organizations, but also to engage in “other concerted activities for the purpose of … mutual or protection” and, as the Board reaffirms in Mclaren Macomb, has been noted under prior cases to provide broad protections for employees to discuss terms and conditions of employment with coworkers, in various official forums—including the judicial, administrative, legislative and political realms—and in the public through media, social media, and general communications that relate to an ongoing labor dispute.
The Board is especially interested in ensuring that severance agreements do not preclude former employees from participating in NLRB processes against their employers. Indeed Supreme Court precedent notes that the congressional intent behind the NLRA is that “all persons with information about [unfair labor] practices … be completely free from coercion against reporting them to the Board.”
It is with the objective of protecting the much maligned and marginalized Section 7 rights of workers, both in unionized and non-union settings, that the Board made its decision in Mclaren Macomb. It ruled that severance agreements that pay employees in return for their promised silence are inherently coercive and contain in them “a reasonable tendency to restrain, coerce, or interfere with the exercise of Section 7” that makes them facially illegal under the NLRA.
This case strengthens employees’ bargaining position in relation to their employer. With employers unable to gag employees by buying off their Section 7 rights, they are more likely to respect existing labor law to avoid poor press and enable workers to report wrongdoing to their unions, fellow workers, and administrative bodies like the NLRB.
At the same time, employers are not left without reputational protection. In the event that former employers feel they are being unfairly disparaged, the courts remain open to them to pursue disgruntled employees for defamation.