Sixth Circuit Dodges NLRB’s McLaren Macomb Standard for Employee Separation Agreements

Back in February 2023, the National Labor Relations Board (NLRB) issued its widely discussed decision in McLaren Macomb that drastically shifted the standard for determining the lawfulness of common employee separation agreements. Review my previous article here for an in-depth analysis of that case. In short, the NLRB ruled that a hospital violated the National Labor Relations Act (NLRA) by unlawfully furloughing eleven employees without bargaining with the union, by directly dealing with those employees in offering them separation agreements, and by offering separation agreements with facially unlawful confidentiality and nondisclosure terms.

Because of the significant impact the decision had on very common terms in employment separation agreements – including the fact that nonsupervisory employees could no longer be asked to keep these agreements confidential (except the financial terms) – many employment and labor practitioners anxiously waited for additional guidance about the impact of the decision and whether it would withstand appeal. On September 19, 2024, the Sixth Circuit Court of Appeals issued an unpublished opinion that enforced the NLRB’s order in full but avoided the critical issue.

The Court found that substantial evidence supported the NLRB’s conclusions that the employer violated the NLRA by failing to bargain with the union about the decision and effects of the employee furloughs and directly dealing with those employees instead of the union. Based on those violations, the Court also held that the hospital’s severance agreements were unlawful even under the prior Board precedent of Baylor and IGT because proffering the separation agreements in light of its other unfair labor practices demonstrated its proclivity to violate the Act. As a result, the Court stated, “we do not address [the NLRB’s] decision to reverse Baylor and IGT, or whether it correctly interpreted the NLRA in doing so.”

What does this mean for employers going forward? First, it affirms that offering separation agreements with terms that may be construed as potentially infringing on an employee’s Section 7 rights will likely be considered unlawful if the employer committed any other unfair labor practices. Second, it means that the more restrictive McLaren Macomb standard remains binding NLRB precedent, at least for now. Cf. J.G. Kern Enterprises, Inc. v. NLRB, 94 F.4th 18, 31 (D.C. Cir. 2024) (finding that the Board’s analysis retained “precedential value” even though a federal circuit court subsequently reversed the Board’s decision and vacated its order in a case). Employers should work with experienced counsel to continue drafting their nonsupervisory employee agreements (both severance and otherwise) narrowly so as to avoid running afoul of the NLRA.