An employer violated employee’s labor rights by offering her a separation agreement that contained unlawful terms ruled a National Labor Relations Board (“NLRB”) administrative law judge (“ALJ”) in Baylor Univ. Med. Ctr., Case No. 16-CA-195335 (Fort Worth, TX, February 12, 2018) (“Baylor”).
This decision is one of the first ALJ rulings to apply the NLRB’s new standard for addressing the legality of facially neutral work rules applicable to union and non-union workplaces under The Boeing Company, 365 NLRB No. 154 (December 14, 2017) (“Boeing”). In Boeing, the new Republican NLRB majority overruled Lutheran Heritage Village-Livonia, 343 NLRB 646 (“Lutheran Heritage”) and announced a new standard it will follow when it evaluates a work rule that, when reasonably interpreted, could potentially interfere with union and other protected concerted activity under Section 7 of the NLRA (Section 7 conduct). Notwithstanding the new, more pro-business Boeing standard, the ALJ found that Baylor violated federal labor law when it offered a terminated employee $10,000 in exchange for signing a severance agreement and general release that included two unlawful provisions. The severance provisions at issue in the case were:
- 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] or any Released Party …
[Employee] agrees that … she must … keep secret and confidential and not … utilize in any manner all … confidential information of … [Baylor] or any of the Released Parties made available to her during her … employment … including … information concerning operations, finances, … employees, … personnel lists, financial and other personal information regarding … employees …
[Employee] agrees that she shall not … make, repeat or publish any false, disparaging, negative, … or derogatory remarks … concerning … [Baylor] and the Released Parties … or otherwise take any action which might reasonably be expected to cause damage … to … [Baylor] and the Released Parties …
No Participation and Confidentiality Provisions Render Severance Agreement Unlawful
The ALJ found that the no participation and confidentiality provisions fell into “Category 3” under Boeing. Category 3 rules are considered unlawful unless their adverse impact on Section 7 conduct is “outweighed by justifications associated with the rule.” The ALJ reasoned that the ban on participating in third party claims could block former employees from providing information in NLRB investigations (NLRA-protected conduct) and that Baylor failed to offer a legitimate rationale regarding why former employees cannot provide information to NLRB agents that is unrelated to their termination or might vindicate other valid NLRA interests. The ALJ reasoned further that the prohibition on disclosing confidential information was worded broadly enough to suggest ex-employees couldn’t discuss their own wages and benefits and that this limitation on NLRA-protected conduct was not outweighed by Baylor’s reported concern that ex-employees might divulge private health-care related information. Accordingly, the ALJ found that the mere offer of the severance agreement with this unlawful language violated the NLRA even though the employee never signed the agreement and the agreement had not been applied in a manner that actually restricted Section 7 conduct.
Non-Disparagement Provision Lawful
While the ALJ’s findings may be concerning to employers including similar language in severance agreements, employers may find solace in the ALJ’s finding that the non-disparagement provision was lawful under “Category 1”. Under Boeing, rules “requiring employees to abide by basic standards of civility” are generally lawful under Category 1. Thus, the ALJ concluded that the non-disparagement language, which barred “false, disparaging, negative, … or derogatory remarks,” was a basic civility standard and lawful under Boeing.
The ALJ’s decision may be appealed to the NLRB in Washington D.C. We will continue to update you here on further developments regarding this case and other cases applying the new Boeing standard.
In the meantime, we recommend that you consult with experienced labor counsel in the event your company offers severance agreements to employees to ensure that the provisions fall into Category 1 or are defensible under Category 2.