We first reported in February 2023 on a stunning and alarming determination by the U.S. Nationwide Labor Relations Board (NLRB or “the Board”)—In re McLaren Macomb—which concluded that the mere proffer of a severance settlement with broad confidentiality and/or non-disparagement provisions may violate Part 7 of the Nationwide Labor Relations Act (NLRA), which protects the proper of staff to interact in concerted exercise for his or her mutual support and safety. The choice set off alarm bells for employers that routinely embody non-disclosure and non-disparagement language of their separation and launch agreements, main some employers to revise their templates and others to scuttle them altogether. Others took a extra hopeful, wait-and-see method till the U.S. Court docket of Appeals for the Sixth Circuit may evaluation and opine on the deserves of the NLRB’s place.
The Sixth Circuit has now spoken. In a September 19, 2024 per curiam determination, a panel of the Sixth Circuit Court docket of Appeals granted the NLRB’s petition for enforcement of its order and denied McLaren Macomb’s cross-petition for evaluation, thus imposing the NLRB’s order in full. For these of us for whom hope springs everlasting, nevertheless, we cling to the chance that dangerous info made for dangerous regulation right here and that the dying knell has not fairly tolled on nondisclosure and nondisparagement agreements. For the supply of this abiding optimism, we should dig into the info of the case.
McLaren Macomb employed 2,300 employees at Mount Clements Hospital in Michigan. In August 2019, 351 of the Hospital’s staff (the “Unit”) voted to unionize. In December 2019, the NLRB licensed the Unit, with Native 40 RN Employees Council (the “Union”) because the Unit’s unique collective bargaining consultant. After the COVID-19 pandemic compelled the Hospital to cut back sure elective and outpatient procedures, the Hospital furloughed, and later completely laid off, eleven Unit staff with out involving the Union within the determination to terminate them or within the negotiation of the severance agreements it introduced to the employees. The severance agreements contained a confidentiality clause that precluded the workers from discussing its phrases with anybody apart from their spouses, authorized and monetary counsel, or pursuant to courtroom course of. The agreements additionally contained clauses that prohibited the workers from making statements to different staff or most of the people “which may disparage or hurt the picture of” the Hospital or its associates.
The Union filed an unfair labor follow cost with the NLRB. The NLRB’s Common Counsel (GC) issued a Criticism based mostly on the Hospital’s failure to contain the Union within the termination selections, for terminating the workers with out affording the Union a significant alternative to discount, for speaking straight with the represented staff concerning the phrases of their severance agreements, and for together with the verboten clauses within the staff’ severance agreements. An administrative regulation decide (ALJ) initially concluded that McLaren Macomb dedicated failure-to-bargain and direct-dealing violations, however the ALJ disagreed with the GC that the severance agreements interfered with the workers’ train of protected NLRA rights. The NLRB adopted the ALJ’s findings with respect to the Hospital’s failure-to-bargain and direct dealing, however reversed the ALJ’s discovering that the severance agreements have been lawful. The Board then petitioned the Sixth Circuit for enforcement of its Order.
The Sixth Circuit, whose evaluation of an NLRB determination is “fairly restricted,” discovered “substantial proof” in help of “the [NLRB’s] conclusion that the Hospital did not discount with the Union over the” terminations, thus rejecting the Hospital’s procedural and circumstantial (COVID-19 exigencies) excuses for its exclusion of the Union from its decision-making. The appellate courtroom thus additionally readily concluded that McLaren Macomb engaged in direct dealing when it supplied the furloughed staff severance agreements with out first discussing their severance—a compulsory matter of bargaining—with the Union. However what employers have been actually ready for was the Sixth Circuit’s place with regard to the language of the severance agreements themselves, and as soon as once more, the appellate courtroom sided with the NLRB, however not in as full-throated a way because the Board might have hoped.
Below older NLRB authority—Baylor Univ. Med. Ctr., 369 NLRB No. 43 (2020) (“Baylor”) and Int’l Sport Tech., 370 NLRB No. 50 (Nov. 4, 2020) (“IGT”), the NLRB held that together with confidentiality and non-disclosure provisions in a severance settlement is lawful, offered the settlement shouldn’t be “proffered … underneath circumstances that will fairly are inclined to intrude with the separated staff’ train of their very own Part 7 [NLRA] rights or these of their coworkers.” See IGT, 370 NLRB No. 50. The ALJ utilized Baylor/IGT to this case and located that the McLaren Macomb severance agreements have been “voluntary, solely supplied to separated employees, and didn’t influence their beforehand accrued advantages” and thus have been lawful. The NLRB reversed the ALJ, discovering underneath Baylor/IGT that the failure-to-bargain and direct-dealing have been circumstances that confirmed the Hospital’s intent to intrude with the workers’ train of Part 7 rights, however that even when such circumstances weren’t current, the textual content of the severance agreements standing alone violated Part 8(a)(1) of the NLRA, thus overruling Baylor/IGT. The NLRB majority (over disagreement by Member Marvin Kaplan) wrote that, even within the absence of further coercive conduct, an employer shouldn’t be “solely free” to current staff with a severance settlement with phrases that on their face chill protected concerted exercise.
On enchantment, the NLRB superior each arguments in help of its place that the severance agreements violated Part 7. First, the NLRB argued that the agreements must be deemed illegal underneath Baylor/IGT as a result of the proffer of the agreements was “half and parcel of” the extra coercive, illegal course of conduct engaged in by the Hospital. Alternatively, the NLRB maintained that Baylor/IGT must be deemed overruled and the severance agreements and their purportedly “facially illegal phrases” must be thought of illegal due to its doubtlessly chilling impact on concerted exercise.
The Sixth Circuit discovered that it “needn’t delve into” advanced problems with whether or not the agreements, on their face, are illegal as a result of “even underneath Baylor and IGT, McLaren’s conduct violated Part 8(a)(1).” That’s, the Sixth Circuit concluded that it didn’t must resolve whether or not Baylor/IGT must be overruled as a result of even when their rationale is utilized to the info earlier than the courtroom, the Hospital’s failure to discount with the Union over the everlasting terminations and the direct negotiation of severance agreements with represented staff represent “precisely the form of illegal conduct from which affordable staff may infer that the Hospital supposed to invoke the severance agreements to intrude with the workers’ Part 7 rights.” Due to this fact, due to the Hospital’s demonstrated “proclivity to violate the” NLRA, the appellate courtroom affirmed the Board’s conclusion that the severance agreements violated Part 7 underneath the Baylor/IGT commonplace.
If there’s a glimmer of hope for employers right here, then, it’s this: The Sixth Circuit seems to view Baylor and IGT as nonetheless good regulation, and however for the overwhelming proof the Hospital intentionally evaded its bargaining obligations, the courtroom might have been inclined to search out the severance agreements have been lawful. In different phrases, a unique employer that had not engaged in Union interference might have discovered a extra sympathetic viewers for its nondisclosure and nondisparagement phrases.
So the place does that go away employers now? Sadly, with a wholesome dose of lingering uncertainty. Would the end result have been completely different with out the direct dealing? Would the Sixth Circuit have had any hesitation discovering the severance agreements lawful if the employer have been non-unionized? The reply, as to each, is presumably. Till such info are earlier than an appellate courtroom, employers proceed to function with out readability as to the validity of confidentiality and non-disparagement provision in commonplace separation agreements and will seek the advice of with counsel concerning the dangers concerned earlier than proffering such provisions to staff, significantly if different elements corresponding to union presence or threats of group complicate the evaluation.