NLRB attacks severance pay End-shutdown
Progressives believe they know what’s best for workers and don’t want departing employees to negotiate with their bosses. That’s the logic behind a federal ruling this week that bars laid-off workers from receiving money in exchange for confidentiality.
The National Labor Relations Board (NLRB) issued a decision on Tuesday that prohibits two common components of severance agreements. Employers can no longer require laid-off workers to keep the terms of their severance secret, and they can no longer force severance recipients to refrain from publicly criticizing the company. The new restrictions apply to all employers except those in fields the NLRB doesn’t oversee, such as government, railroads and airlines.
The decision concludes a case known as
, which refers to a Michigan hospital that furloughed 11 outpatient care workers amid the 2020 Covid shutdown. The employees were offered severance pay in exchange for their promise not to discuss payments publicly or disparage the hospital , and all 11 agreed. But his union filed a complaint with the NLRB declaring the agreements invalid.
An agency administrative law judge heard the case in 2021 and issued a split ruling. His decision said the hospital violated collective bargaining rules by dealing directly with union members. But he also found that the actual separation agreements were legal. The ruling cited two recent NLRB cases setting limits on such deals. Baylor University Medical Center other HEboth from 2020, upheld the right to change hush pay, except where employers had broken other workplace rules.
The agency broke those precedents this week and set new rules. “Employers cannot ask individual employees to choose between receiving benefits and exercising their rights,” Chairman Lauren McFerran said Tuesday. The case was decided in a 3-1 vote, with three Democratic appointees in favor and only one Trump appointee dissenting.
In legal terms, the new ruling errs in describing the compensation as a “benefit.” As the agency contended in the 2020 cases, the payments offered to employees were optional, were not conditions of employment, and were offered only upon separation. They are different from compensation such as bonuses or health insurance.
On a practical level, the decision may lead to less severance pay. Consider a cash-strapped company that wants to offer severance pay to encourage some employees to look for another job. That offer could backfire if they think the recipients will spread the word to current staff or the media. If they cannot enforce confidentiality, an employer could proceed with the firings but forego severance pay.
When the government limits the scope of bargaining, employers and workers often lose. The NLRB will congratulate itself on its ruling, while workers may lose the opportunity to accept cash on their own terms.
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