How the McLaren Macomb NLRB Ruling Alters Severance Agreements in Michigan

For decades, when a company laid off an employee, the standard practice was to hand them a severance agreement packed with strict confidentiality and non-disparagement clauses. If the employee wanted the money, they had to legally promise never to say anything negative about the company and to keep the terms of the payout completely secret. However, a massive legal shift originating right here in Michigan has changed everything.

The ruling in the McLaren Macomb case sent shockwaves through human resources departments across the country. The National Labor Relations Board (NLRB) declared that these overly broad silencing clauses are illegal for most employees. If you are an employer updating your exit packages, or an employee reviewing a severance offer in Detroit or Grand Rapids, you must understand exactly how this ruling impacts your rights.

The Core of the McLaren Macomb Decision

In McLaren Macomb, 372 NLRB No. 58 (NLRB 2023), a Michigan hospital offered furloughed employees severance agreements requiring them to keep the agreement a secret and forbidding them from making statements that could harm the hospital's reputation. The NLRB ruled that merely offering an agreement with these broad terms violates the law.

The board found that these clauses unlawfully restrict an employee's rights under the 29 U.S.C. § 157 (commonly known as Section 7 rights). Section 7 guarantees workers the right to band together to improve their working conditions. Banning an employee from discussing their severance or criticizing their former employer prevents them from helping their former coworkers or engaging with labor unions.

Union vs. Non-Union Employees Under the NLRA

A common misconception is that the NLRB only protects unionized workers. This is completely false. The protections of the National Labor Relations Act apply to almost all private-sector employees, whether they are in a labor union or not. Therefore, if a non-union tech startup in Ann Arbor or a non-union manufacturing plant in Macomb County issues a broad non-disparagement severance agreement, they are committing an unfair labor practice just the same as a unionized auto plant would under the 29 U.S.C. § 158.

Rank-and-File Workers vs. Statutory Supervisors

The most important caveat to the McLaren Macomb ruling is who it applies to. The NLRA only protects standard employees. It explicitly excludes supervisors and managers.

Under the 29 U.S.C. § 152, a statutory supervisor is someone who has the authority to hire, fire, discipline, or direct other employees using independent judgment. Because supervisors do not have Section 7 rights, employers can still require executives, managers, and high-level directors to sign strict confidentiality and non-disparagement agreements in exchange for severance pay. If you are a rank-and-file worker, however, you cannot be silenced.

Compliance Checklist for Updating Standard Severance Templates

Employers who use outdated severance templates risk severe penalties if an employee files a charge with the National Labor Relations Board, Region 7, Detroit using Form NLRB-501, FED, National Labor Relations Board, Charge Against Employer. To ensure compliance, employers should review this checklist:

• Remove Blanket Non-Disparagement Clauses: You cannot ban all negative statements. You can only prohibit statements that are maliciously false (defamation).
• Narrow Confidentiality Clauses: You cannot ban the employee from discussing the severance amount with former coworkers or a union. You can only mandate confidentiality regarding proprietary trade secrets.
• Do Not Rely on Generic Savings Clauses: A broad disclaimer stating that the agreement does not waive statutory rights will not cure overbroad restrictions under NLRB General Counsel guidance. Employers must affirmatively narrow non-disparagement and confidentiality clauses or incorporate a detailed, explicit statement of protected Section 7 rights.
• Separate Supervisor Agreements: Maintain two different severance templates: a compliant one for rank-and-file employees, and a stricter one for statutory supervisors.

Penalties and Costs for Employers

Failing to update your severance agreements can lead to significant legal costs and federal scrutiny.

How Long Does the Process Take?

If an employee files an unfair labor practice charge against a Michigan employer regarding an illegal severance agreement, the regional NLRB office will typically investigate the claim within 7 to 14 weeks. If the board issues a formal complaint and the employer chooses to fight it, a hearing before an Administrative Law Judge can take 6 to 12 months to be scheduled and resolved.

Frequently Asked Questions (FAQ)