Confidentiality and No-Participation Provisions in Voluntary Severance Agreements Lawful

On March 16, 2020, the Board issued its decision in Baylor University Medical Center and Dora S. Camacho reversing the 2018 ALJ decision and holding that Confidentiality and No Participation in Third-Party Claim provisions in a voluntary severance agreement are lawful. The decision overrules Clark Distribution System, Shamrock Foods Co., and Metro Networks to the extent the holdings extend beyond their fact patterns involving employees who were unlawfully dismissed for exercising their rights under the National Labor Relations Act (Act).

The Baylor Medical University severance agreements

Baylor Medical University offered departing employees an opportunity to voluntarily sign individual severance agreements in exchange for severance pay and post-employment benefits to which they would otherwise not be entitled. According to the Board, the separation from employment by the employees was lawful and unrelated to a labor relation’s dispute. The following three provisions of the Charging Party’s severance agreement were in dispute:

• No Participation in Claims provision providing that the signatory “agrees that, unless compelled to do so by law, the [signatory] will not pursue, assist or participate in any Claim brought by any third party against …[Baylor] or any Released Party.”
• Confidentiality provision requiring that the signatory “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 [the signatory] during her…employment…including…information concerning operations, finances… employees,… personnel lists; financial and other personal information regarding…employees…”
• Non-Disparagement provision providing that the signatory “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…”

ALJ decision

The ALJ determined that the Non-Disparagement provision was lawful while the “Confidentiality” and  “No Participation in Claims” provisions were unlawful. The ALJ analyzed the provisions under the Boeing framework that is used to evaluate the impact of facially neutral work rules and policies on the exercise of rights under the Act by weighing the impact of the provisions on the employee’s exercise of NLRA rights against the employer’s legitimate justification of the rule or policy.

In reaching his decision, the ALJ described the ban under the No Participation in Claims provision as “striking at the core of protected NLRA rights” and unlawful as a category C violation because it barred former employees from voluntarily providing information on ULP charges to Board agents without a legitimate justification for the ban. Similarly, the ALJ also determined that the Confidentiality provision was unlawful as a Category 3 violation under the Boeing framework. The scope of the Confidentiality provision was overly broad because it banned §7 discussions by former employees about wages, hours, benefits, and working conditions with unions and others after their separation. Additionally, it was not expressly limited to Baylor’s articulated rationale of protecting private health-care information and communications.

Board reverses the ALJ decision

In a decision reflective of the current Board’s effort to narrow the scope of prior Board rulings, the Board reversed the ALJ’s decision as to the Confidentiality and No participation provisions. The Board further held  that the ALJ erred in applying the Boeing analysis because severance agreement provisions are not work rules. “Two fundamental” differences between the severance agreement provisions and work rules are that the agreement  1) is not mandatory and 2) applied only to “post termination activities and ha[d] no impact on the terms and conditions of employment or accrued severance pay credit or benefits arising out the employment relationship that [Baylor] would have been obligated to pay regardless of whether the departing employee signed the agreement.”

Critical to the Board’s holding was the lack of allegations that the 1) offer of a severance agreement was related to a labor dispute or had any effect on the terms and conditions of employment and 2) the discharge of the charging party was unlawful. According to the Board, the facts did not demonstrate that Baylor harbored “animus against §7 activity.”

In the footnotes, the Board acknowledged that their decision overruled the decisions Clark Distribution System, 336 NLRB 747 (2001), Shamrock Foods Co., 366 NLRB No. 117 (2018) and Metro Networks, 336 NLRB 63 (2001) to the extent the three decisions broadly characterized  severance agreements with non-assistance provisions as unlawful. The Board limited the three decisions to their fact patterns involving offers of severance agreements with non-assistance clauses  to one or more employees who were unlawfully retaliated against and discharged for engaging in §7 activity. “Under such circumstances, offering a severance agreement with non-assistance clauses would reasonably tend to interfere with the exercise of §7 rights.”