Labor board ruling yields limits on confidentiality in hospital severance agreements

The ruling in a case involving furloughed hospital employees in Michigan will make it harder for employers to include confidentiality and non-disparagement provisions in severance agreements, reported.

The ruling, issued Feb. 21 by the National Labor Relations Board, "returns to long standing precedent" that employers may not offer employees severance agreements that require workers to broadly waive their rights under federal labor law, the board said.

The board found that broad confidentiality and non-disparagement provisions in severance agreements do not "recognize that unlawful provisions in a severance agreement proffered to employees have a reasonable tendency to interfere with, restrain or coerce the exercise of employee rights under" the National Labor Relations Act. 

According to the board, the decision reverses the previous board's decisions in Baylor University Medical Center and IGT d/b/a International Game Technology, issued in 2020, "which abandoned prior precedent in finding that offering similar severance agreements to employees was not unlawful, by itself."

"We accordingly overrule Baylor and IGT and, upon careful analysis of the terms of the nondisparagement and confidentiality provisions at issue here, we find them to be unlawful, and thus find the severance agreement proffered to employees unlawful," the board wrote.

At issue in the recent case are severance agreements offered to 11 unionized workers furloughed from McLaren Macomb Hospital in Mount Clemens, Mich. Following the onset of the pandemic in 2020, the hospital terminated its outpatient services, admitted only trauma, emergency and COVID-19 patients, and temporarily furloughed the workers, according to the National Labor Relations Board decision. The hospital permanently furloughed those 11 employees in June 2020 and offered them severance agreements. 

The board said the agreements prohibited the workers from making statements that could disparage the hospital and from disclosing the terms of the agreement itself.

Shela Khan Monroe, McLaren Health Care vice president of labor relations, told Becker's in a statement that McLaren Macomb "used confidentiality and non-disparagement provisions in its severance agreements that were legal and permitted based on existing board law at the time."

She added that provisions in this case "were standard in the employment industry and customarily used in severance agreements offered by employers throughout the state of Michigan and beyond. This case has broader implications for employers across the country considering how widely used such provisions have been in employer severance agreement[s].  The current general counsel for the NLRB made clear prior to this case that striking down confidentiality or non-disparagement provisions was a priority. To that end, the board took the opportunity in this case to achieve that goal. This decision indicates the board will not allow such provisions to rely on broad terms and has returned to a broader interpretation of limiting employer rights under the NLRA."

She said McLaren Macomb has reviewed the decision and is "weighing all options moving forward."  

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