May 25, 2020

NLRB Holds Provisions in Voluntary Severance Agreement Are Not Unlawful “Work Rules” (US)

In non-coronavirus related developments, on March 16, 2020, the National Labor Relations Board (NLRB or Board) issued a decision in Baylor University Medical Center, reversing an Administrative Law Judge (ALJ) decision that found certain severance agreement provisions to be unlawful under Section 8(a)(1) of the National Labor Relations Act (NLRA).  Section 8(a)(1) prohibits employers from interfering with employees’ rights to act collectively to improve the terms and conditions of their employment.  The decision is noteworthy as another example of the current Board’s effort to rein in the sort of overexpansive interpretations of the NLRA that were the legacy of prior Boards.

The severance agreement provisions at issue, used regularly by Baylor’s Medical Center for employee separations, were as follows.

  • No Participation in Claims: [Employee] agrees that, unless compelled to do so by law, [Employee] will not pursue, assist, or participate in any Claim brought by any third party against … [Baylor].

  • Confidentiality: [Employee] agrees that … [she/he] must … keep secret and confidential and not … utilize in any manner all … confidential information of … [Baylor] … made available to [her/him] during [her/his] employment … including information concerning operations, finances, …, employees, … personnel lists; financial and other personal information regarding … employees …

  • Non-Disparagement: [Employee] agrees that [she/he] shall not … make, repeat, or publish any false, disparaging, negative, … or derogatory remarks … concerning … [Baylor] … or otherwise take any action which might reasonably be expected to cause damage … to … [Baylor].

The ALJ analyzed these provisions under the Boeing standard for determining the lawfulness under the NLRA of mandatory workplace rules affecting employee terms and conditions of employment.  (See our previous discussion of Boeing here).  The ALJ concluded that the “No Participation” rule was unlawful under Boeing because it banned individuals from participating in NLRB investigations and because Baylor failed to articulate a legitimate rationale for the provision.  The ALJ similarly found the “Confidentiality” clause unlawfully as it purportedly prohibited employees from engaging in protected communications about wages, hours, and work conditions, and the employer’s concerns about confidentiality did not outweigh the provision’s limitation on NLRA protected rights.  Notably, the ALJ found the Non-Disparagement provision was a valid “civility” rule, allowable under Boeing and the NLRA.

Upon review, the Board reversed the ALJ’s findings regarding the No Participation and Confidentiality clauses.  It held that the ALJ incorrectly analyzed those provisions under the Boeing standard, which applies to work rules, explaining that severance agreement provisions differ from workplace rules in two “fundamental” ways.  First, the Board explained that the severance agreements were not mandatory, but optional and applied only in the event of a separation of employment.  Second, and similarly, because the provisions pertained only to postemployment activities and were in exchange for monetary benefits to which the former employee would not otherwise have been entitled (that is, the severance payments were not accrued or otherwise earned during or as a result of the employment period), the Board concluded that the provisions had “no impact on terms and conditions of employment.”  Although the NLRB’s General Counsel also argued in the matter that the mere offer of severance agreements containing these provisions violated Section 8(a)(1), the Board disagreed with this too, concluding that there was no evidence that the offers of severance infringed upon the offerees’ or other employees’ rights to engage in protected concerted activities.

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About this Author

Daniel B. Pasternak, Squire Patton Boggs, Phoenix, Labor Litigation Layer
Partner

Dan Pasternak focuses his practice on litigating labor and employment claims, representing management in traditional labor relations matters, and working with employers to develop and enforce business-sensible policies and practices to effectively manage their human resources.

Dan represents employers before federal and state courts and administrative agencies, and in arbitration and mediation proceedings, in employment matters arising under the array of federal and state employment laws, including discrimination, harassment, retaliation,...

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