On Thursday, September 19, 2024, the 6th Circuit Court of Appeals issued its long-awaited decision in McLaren Macomb, an appeal of the National Labor Relations Board’s (“NLRB”) decision that invalidated severance agreements that contain non-disparagement and confidentiality clauses as violative of employees’ Section 7(a) rights to engage in concerted and protected activity. The decision, however, came up short in the way of guidance.
Quick Recap
McLaren Macomb hospital furloughed 11 employees without first bargaining with their Union. The employer then communicated directly with those employees to discuss the terms of their severance agreements without consulting their Union. Following a complaint, the Board ordered the hospital to reinstate the furloughed employees and compensate them for any monetary damage resulting from this unfair labor practice. The hospital took the matter on appeal.
Procedurally, the Administrative Law Judge (“ALJ”) who heard the case held that the hospital violated the NLRA by failing to bargain with the Union instead of the employees. Yet, the ALJ concluded that the terms of the severance agreements did not violate section 7(a)(1), applying a standard established by a pair of 2020 board decisions, “Baylor/IGT”. Those cases held that confidentiality and non-disparagement provisions in severance agreements are lawful, provided the agreement is not “proffered…under circumstances that would reasonably tend to interfere with the separating employees exercise of their own Section 7 rights or those of their coworkers.” On appeal to the Board, the panel, in a split vote, reversed the ALJ’s decision and declined to apply the Baylor/IGT standard, explaining that those cases took a “severely constricted view of section 7 rights”. The Board asserted it was restoring prior law which only reviews the facial language of the severance agreements in determining whether a section 7(a)(1) violation occurred. (Shortly following the Board’s decision, NLRB General Counsel Jennifer Abruzzo issued GC Memo 23-05, advising Regional NLRB offices to enforce not only the Board’s decision, but to go further, and challenge other standard contract terms as violative of employees’ rights).
The parties filed cross petitions for enforcement/review of the Board’s decision. The 6th Circuit panel, in its decision, easily affirmed the Board’s decision that the employer violated section 7(a)(5) and 7(a)(1) when it failed to bargain over its decision to permanently furlough employees. Further, the 6th Circuit had no trouble concluding that the employer violated the employees’ rights by dealing directly with the furloughed employees instead of with the Union. The 6th Circuit panel notably did not rule on the severance agreement language itself.
The Decision.
The Board’s decision on the enforceability of severance agreements, including confidentiality and non-disparagement clauses, has had employers, unions, and attorneys waiting with bated breath. The 6th Circuit, however, chose not to take the opportunity to clarify the law. Rather, it sidestepped the issue altogether and concluded that it only needed to resolve the petitions on the basis of the underlying 7(a)1 and 7(a)5 violations, as well as the remedies. Because the Board held that even under the Baylor/IGT standards, the hospital’s conduct violated the law, and the 6th Circuit panel upheld that decision. The 6th Circuit did make it a point to affirm the Board’s conclusion under the 2020 standard articulated in Baylor/IGT. Thus, having found that the employer committed an unfair labor practice under previous Board precedent, the Court concluded it did not need to address whether the Board, in its decision to reverse Baylor/IGT, correctly interpreted the NLRA in doing so.
A Missed Opportunity.
The 6th Circuit panel’s decision in this case represents a missed opportunity to provide clarity on the topic of whether the National Labor Relations Board, a quasi-judicial entity, is entitled to any deference in the post Loper Bright environment. In Loper Bright, the U.S. Supreme Court held that federal courts no longer owe deference to an agency’s interpretation of statutes it administers, absent specific congressional intent. The 6th Circuit panel did not explicitly clarify whether the Baylor/IGT standard is dead or revived. Furthermore, the issue of the validity of severance agreements containing confidentiality and non-disparagement clauses remains unresolved. Moreover, the decision is a non-published decision and therefore remains strictly binding only on the parties to the case, leaving lawyers, employers, employees, and unions to wait for another decision, perhaps with better facts, to obtain guidance on this topic.
Employers should continue to reach out to their labor law counsel on this subject matter. Obviously, the upcoming election results could impact the Board’s position on these topics prior to another case coming before an appellate court for a decision. If you have any questions about this decision or your company’s severance agreements, please reach out to partner Kevin Moore, chair of the Labor Law Practice Team at Barley Snyder.
