NLRB prohibits severance agreements with broad rights waiver

The National Labor Relations Board held on Feb. 21 that employers may not offer severance agreements that require employees to broadly waive their rights under the National Labor Relations Act, which applies to non-government employers in the United States, including banks.

In McLaren Macomb, a hospital offered a severance agreement to 11 employees that the hospital permanently furloughed. The agreement broadly prohibited the employees from making statements that could disparage or harm the image of the hospital. The agreement also prohibited the employees from disclosing the terms of the agreement.

Under section 7 of the NLRA, employees have “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” as well as the right “to refrain from any or all such activities.” In its decision, the NLRB held that the severance agreement violated the NLRA because it restricted the employees’ ability to exercise those rights. Prior NLRB decisions had concluded that offering severance in return for an agreement by the departing employee not to engage in certain, otherwise protected, conduct, did not violate the NLRA. In McLaren Macomb, the NLRB overruled those decisions. Read the decision. For more information, contact ABA’s Jonathan Thessin.