Resources

Client Alerts, News Articles, Blog Posts, & Multimedia

Everything you need to know about BMD and the industry.

The NLRB Limits the Reach of Confidentiality and Non-Disparagement Provisions in Severance Agreements Overruling Trump-Era Policies

Client Alert
March 14, 2023

 

California Severance Agreement Requirements | Minnis & Smallets LLP | Employment Law Attorney San Francisco

Employers should exercise caution and closely examine the content of severance agreements to ensure compliance with a recent National Labor Relations Board (“NLRB”) decision.  On February 21, 2023, the NLRB restricted the breadth of permissible language of confidentiality and non-disparagement clauses when it issued its decision in McLaren Macomb and overruled its Trump-era decisions in Baylor University Medical Center and IGT d/b/a International Game Technology.

 

Which employers are covered by the National Labor Relations Act (“NLRA”)?

 

The NLRA covers most private sector employees, including manufacturers, retailers, private universities, and healthcare facilities.  It does not apply to federal, state, or local governments; employers in the agricultural sector; and employers involved in interstate railroads and airlines.  29 U.S.C. §152(2). 

 

Who is an employee?

 

An employee is a person without supervisory responsibilities and powers.  A supervisor is defined by the NLRA to be “any individual having authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibly to direct them…”  29 U.S.C. §152(11).

 

The McLaren Macomb Decision

 

This case arose from a confidentiality and a non-disparagement provision present in a severance agreement that was presented to eleven employees that were permanently furloughed at the onset of the COVID-19 Pandemic.  The furlough occurred as a result of the federal government’s regulations prohibiting elective and outpatient procedures.  Also, “nonessential employees” were prohibited from working inside the hospital, necessitating a furlough, which was a common experience in the healthcare industry at that time.  The clauses at issue state,

 

Confidentiality Agreement.  The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.

 

Non-Disclosure.  At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment.  At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.    

 

McLaren Macomb, 372 NLRB No. 58, 2 (2023).  The Board held that “Examining the language of the severance agreement here, we conclude that the nondisparagement and confidentiality provisions interfere with, restrain, or coerce employees’ exercise of Section 7 rights.”  Moreover, even “proffering” or presenting an employee with a severance agreement with such language constituted a violation of Section 8(a)(1) of the NLRA.  Id.

 

Regarding the non-disparagement provision, the Board reasoned that the provision was overly broad because it was not limited to just the Respondent-employer, but included “its parents and affiliated entities and their officers, directors, employees, agents and representatives” and also included no temporal limitation. 

 

As to the confidentiality provision, the Board was also concerned about the chilling effect on Section 7 rights of employees because it would prohibit the employee from providing information to the Board concerning the employee’s rights under the NLRA or cooperating with a Board investigation.  The Board affirmed, “established public policy that all persons with knowledge of unfair labor practices should be free from coercion in cooperating with the Board.” 

 

What is appropriate?

 

This decision creates cause for caution for covered employers.  Before a severance agreement is offered to an employee, employers should consult with legal counsel familiar with employment law issues to ensure that the agreement is compliant with McLaren Macomb. Careful revision of any potential severance agreements, especially confidentiality and non-disparagement provisions, should occur before offering a severance agreement to an employee as the NLRB has clearly returned to more restrictive standards.     

BMD’s Labor and Employment team is here to answer any questions employers may have about compliance with the NLRB's decision and other state and federal laws regarding employment. If you have any questions about this topic or wish to discuss, please contact Bryan Meek at bmeek@bmdllc.com or Angelina Gingo at acgingo@bmdllc.com.

NLRBNational Labor Relations BoardSeverance
Client Alert

Ohio Supreme Court Clarifies Medical Statute of Limitations

February 1, 2021The Ohio Supreme Court issued a decision in late December that clarifies and finalizes the Ohio law regarding the period of time in which patients can assert claims for medical malpractice. The Court was examining the interplay between three different statutes being the statute of limitations, the statute of repose, and the savings statute.Client Alert

Ohio Hospitals and Healthcare Clinics: It’s Time to Revisit Your Billing and Collection Practices

February 1, 2021According to a recent Cuyahoga County case, certain healthcare entities may not be protected from liability when engaging in unfair or deceptive billing acts. This decision is consistent with the growing trend across the country to encourage price transparency and eliminate unfair surprise billing practices by health care organizations. Now is the time for hospitals and other health care organizations to revisit their billing and collection policies and procedures to confirm that they are legally defensible and consistent with best practices.Client Alert

HIPAA Business Associate Agreements: Why These Contracts Matter

January 27, 2021No one loves drafting, reading or negotiating HIPAA Business Associate Agreements (BAAs). Yet many of us need to do so, and some of us do so daily. They are often boring, dense and technical, but BAAs are important from both a legal and a business perspective, and they deserve our attention. Failure to enter a BAA when one is required can constitute a HIPAA violation that results in substantial liability, as demonstrated by certain recent Department of Health & Human Services (HHS) settlements.1 A business associate who makes a disclosure that is not authorized by the applicable BAA or required by law can be subject to civil and, in some cases, criminal penalties. Further, parties are often presented with BAAs that contain onerous one-sided indemnification and other provisions that can be devasting to an organization in the event of a HIPAA breach. The significance of a BAA is often not fully understood by the parties until something goes wrong (e.g., a HIPAA security incident or breach, an Office of Civil Rights (OCR) audit or a fracture in the relationship between the parties) and, at that point, there is limited opportunity to mitigate legal and business risk. Ideally, attention should be given at the commencement of the business associate relationship, when the parties are able, to thoughtfully addressing regulatory requirements, planning and preparing for potential adverse events and appropriately allocating risk among the parties. As with most healthcare regulatory compliance initiatives, a proactive approach with respect to BAAs is preferable. This article provides a broad overview of certain BAA requirements and some practical negotiating tips for the parties involved.Client Alert

“I’m Out Of Here!” Now What?

January 27, 2021We all know that the healthcare industry is experiencing a wave of integration. This trend has been evident for many years. Fewer physicians are willing to assume the legal, financial and other business risks associated with owning their own practices. More and more physicians, including anesthesiologists, are becoming employed by large physician groups, health systems and national providers. This shift necessarily involves not only entry into new employment arrangements but also the termination of existing relationships. And those terminations are often governed by written employment agreements, state and federal healthcare laws and employer benefit plans and other policies and procedures. Before pursuing their next opportunity, physicians should pause for a moment and first attend to the arrangement that they are leaving. Departing physicians need to understand their legal rights and obligations when leaving their current employment relationships in order to avoid unintended consequences and detrimental missteps along the way. Here are a few words of practical advice for physicians contemplating an exit from their current employment arrangements.Client Alert

Investment Training for the Second and Third Generations

January 19, 2021Consider this scenario. Mom and Dad started the business from the ground up. Over the decades it has expanded into a money-making machine. They are able to sell the business and it results in a multimillion-dollar payday for their labors. The excess money has allowed Mom and Dad to invest with various financial advising firms, several fund management groups, and directly with new startups and joint ventures. Their experience has made them savvy investors, with a detailed understanding of how much to invest, when, and where. They cannot justify formation of a full family office with dedicated investors to manage the funds, but Mom and Dad have set up a trust fund for the children to allow these investments to continue to grow over the years. Eventually, Mom and Dad pass. Their children enjoy the fruits of their labors, and, by the time the grandchildren are adults, Mom and Dad's savvy investments are gone.
Older posts
Newer posts