Labor Relations Insight by Phil Wilson

Do you ever think about your dental insurance? I don’t. And that’s probably what most dental insurers count on. But if I held the dental insurance policy covering the NLRB, I’d be concerned.

McLaren Macomb offers a glimpse into just how far the NLRB will go to twist Section 7 to squash anything other than pro-union speech. In McLaren Macomb, employers are prohibited from offering confidentiality, non-disclosure, and non-disparagement provisions in settlement agreements.

In McLaren Macomb, a hospital temporarily furloughed 11 union-represented employees during Covid-19. Later they decided to make the furlough permanent and entered into severance agreements with the employees affected. These agreements included confidentiality and non-disclosure language, enforceable by injunctive relief. The employer did not bargain over the decision or the effects of its decision to furlough the employees. An NLRB majority (Wilcox, Prouty, and McFerran, with Member Kaplan dissenting) found the company violated the Act by circumventing the union, which is not a controversial finding. However, the company was separately found to violate the Act by simply offering a severance agreement with confidentiality and non-disclosure provisions. And while they were less explicit about this last point, they effectively ruled that it was unlawful for these employees to enter into those agreements. That breaks new ground.

Notably, the Board majority did not find any union animus in this case and went out of its way to say union animus was irrelevant. Just offering the settlement was a per se violation of the statute.

The Board majority explains that Section 7 applies broadly, not just to current employees but also to people not employed by this employer and to non-employees (like the former employees of the company). They argue that confidentiality and non-disclosure rules prevent the employee who enters the agreement from disclosing to others what is in the settlement (how much, terms, etc.) Further, they argue that disclosing these things helps both the former employee and the employees who continue to work to exercise Section 7 rights.

There are a few problems with Macomb. The broad construction of section 7 completely ignores the right to refrain, essentially writing it out of the Act. Section 7 certainly includes all the broad rights the Board majority suggests in its opinion. But it completely avoids talking about that pesky “right to refrain” that is right there, smack dab in the middle of Section 7. And that right to refrain isn’t just some words thrown in; it has real value to employees, especially in a situation like this.

In this case, the employer and employee are entering into a settlement, which includes payment in exchange for a waiver of claims. The employees, in this case, are waiving reinstatement, plus any other claims they might have. In situations like this, both the employee and the employer have interests they want to protect. The employee is often looking to get the most money they can, so they can move on with their life. The employer wants to ensure that there will be no additional claims related to employment and often wants to avoid any potential negative PR or reputational damage from a lawsuit. The company is often willing to offer additional value to a former employee in exchange for this.

Here is where the right to refrain has real value for an employee. Remember, every employee has a Section 7 right to refrain from concerted activity—in this case, refrain from explaining the terms of a settlement agreement. I don’t think even this Board and General Counsel would argue that the employee who settles their employment claim is required or compelled to disclose those terms. Then why would they not have the right to agree not to disclose them, especially when that right is explicitly stated in the statute? In law, there’s this idea of a “basket of rights”—basically the rights a potential litigant can assert in their case. The Board majority just yanked the right to refrain out of the basket, and it’s a valuable right to remove.

In most termination cases, a waiver of reinstatement doesn’t have a lot of value. Many former employees find another job and don’t really want to go back. Waiving other claims has some value to the employer, but often there isn’t any other viable claim, so that’s not of much value either.

What has the most value for the employer is simply having the matter closed and not having to worry about it coming up again in the future. And in today’s media environment, it is especially valuable to not worry about a negative PR issue. The right to refrain adds this right into the basket. McLaren Macomb writes the right to refrain from sharing out of the statute—what is the right to refrain if it doesn’t include a right to say, “I won’t talk to others about this agreement?”

Some might point to the prohibition of so-called “yellow dog” agreements outlawed in the Norris-LaGuardia Act of 1932. This is a contract where an employer asks a potential or current employee to agree, “I won’t become a union member.” The severance agreements, in this case, do not in any way restrict whether someone joins or becomes a member of a union or even what they say about unions generally. They limit only what that person can say about the specific provisions agreed to in this agreement.

While I was writing this, the General Counsel issued a new memorandum further clarifying how she plans to enforce the McLaren Macomb decision, and it’s a doozy. In addition to the problems with the original decision, there are now two more to worry about, retroactivity and supervisory settlement agreements.

The most important new development is that the McLaren Macomb decision will be applied retroactively. That means the General Counsel is instructing the Regions to argue that any settlement agreement entered in the last 6 months that includes the offending provisions of confidentiality, non-disclosure, and non-disparagement is per seunlawful. Not only that but any attempt to enforce one of the clauses is considered a new unfair labor practice, which basically says every one of these clauses is immediately unenforceable. That’s big news.

In addition, the General Counsel also raises the possibility that many severance agreements with supervisors are also covered by this decision. Her point here is that while supervisors are generally not protected by the NLRA, in some cases, they can be if they are being disciplined or terminated for refusing to support an employer’s unfair labor practice. As the definition of Section 7 expands and expands, one can imagine creative attorneys figuring out ways to bootstrap these supervisor settlement agreements onto the McLaren Macomb decision.

There are too many problems to mention here. Outlawing critical clauses in millions of severance agreements with one stroke of the pen is outrageous. As mentioned above, these agreements provided real value based on the real promise that they’d remain confidential. All that value has gone poof. And that’s a government taking, which is unconstitutional.

You now have something in common with the NLRB’s dental insurer: you will both be up at night. You’ll be up at night trying to figure out how to navigate the legal minefield the NLRB, and General Counsel have just plopped you in the middle of. The dental insurer is up trying to figure out how to cover all the claims for kicked-in teeth that are coming after the federal courts get to review these decisions. It’s not going to be pretty.