National Labor Relations Board Restricts Non-Disparagement Clauses in Labor Contracts — What That Means for Physician Employment Agreements

Healthcare and professional businesses should be wary when drafting employment agreements meant to protect themselves from employees’ negative communications, especially post-termination. Earlier this year, the National Labor Relations Board (NLRB) shot down a hospital’s attempt to use severance agreements to prevent employees from disparaging the institution after they were terminated. In the decision issued in McLaren Macomb, the NLRB said the non-disparagement and confidentiality provisions clearly violated Section 7 of the National Labor Relations Act (NLRA). The NLRB proscribed employers’ broad use of this traditional method to protect their business interests, brand and goodwill. McLaren Macomb and Local 40 RN Staff Council, Office of Professional Employees, International Union (OPEIU), AFL-CIO. Case 07-CA-263041 (February 21, 2023)

The NLRA provides private sector employees certain fundamental rights to advance their employment interests. Section 7 particularly protects their right to engage in concerted activities which consist of two or more workers acting together to seek better pay or working conditions. This can include critiquing an employer and its practices during and after employment. The employer cannot fire, threaten, or discipline employees for concerted activities. Employees do not need a union to engage in these activities.

Physicians — Protected under the NLRA

For healthcare employers, the question becomes whether NLRA prohibitions protect physicians also?  Can they use non-disparagement and confidentiality provisions in physician contracts to protect themselves? Generally, the NLRA does not cover supervisors.  At first glance, physicians seem to fall within that category because of their perceived supervisory roles.  However, on November 26, 1999, the NLRB expressly distinguished physicians as protected “employees” under the NLRA. The NLRB stated, “Although physicians have the authority to direct other employees within a healthcare institution, their primary role is to provide healthcare services to patients, not provide administrative and personnel services to the institution itself.” Therefore, merely giving physicians supervisory duties is not sufficient to negate NLRA coverage and protection. Piedmont Health Services, Inc. and Piedmont Health Services Medical Providers United, Case No. 10-RC-286648. 

To categorize a physician as a supervisor, employers should expressly include the NLRA’s definition of “supervisors” in their employment contracts.  Section 2(11) defines “supervisors” as “having authority … to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, … to direct them, or to adjust their grievances, or effectively to recommend such action … the exercise of such authority is not of a merely routine or clerical nature, but requires the use of independent judgment.” If a physician’s job description fails to satisfy this definition, s/he then enjoys NLRA protections.  

The McLaren Macomb Decision

This is why healthcare facilities and professional medical practices should pay attention to the recent McLaren Macomb decision when negotiating employment contracts with physicians, particularly as it relates to confidentiality and non-disclosure clauses. In this case, the NLRB examined language in a hospital’s severance agreements that prevented terminated employees from disparaging the company. These were the two clauses it focused on:

“Confidentiality Agreement. The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.”

“Non-Disclosure. At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.”

Additionally, the severance agreements threatened substantive monetary and injunctive sanctions if breached.

On its face, the NLRB found that the non-disparagement and confidentiality clauses in the severance agreements interfered with, restrained, or coerced the employees from exercising their rights under Section 7 of the NLRA. It stated that “public statements by employees about the workplace are central to the exercise of employee rights under the [NLRA] …” and that the broad brush of the hospital’s provisions had “a clear chilling tendency” on employees’ exercise of rights. The NLRB concluded that it was illegal for the hospital to offer severance agreements that broadly prohibited employees from speaking negatively about an employer or disclosing information about employment practices. They were unlawful because they thwarted employees’ engagement in protected concerted activities. Employers could not simply contract away employees’ rights.

Notably, the NLRB did not prohibit all employer attempts to protect themselves from employee disparagement and disclosure of confidential information. As such, employers should seek legal advice on accurately drafting employment contracts and severance agreements that pass NLRB scrutiny.

If you have any questions about physician employment agreements, please contact Amrill Salcedo-Alonzo, Esq.

• Posted on: Apr 22 2023