Recent Developments in Employment Law

President Joe Biden has repeatedly made it clear that he wants to leave his legacy as one of the most pro-worker Presidents in the history of the United States. Accordingly, it should come as no surprise that he has appointed people to his administration who share those same viewpoints. Two major developments in employment law that have occurred recently include (a) the National Labor Relations Board’s (“the NLRB” or “the Board”) ban of broadly drafted non-disparagement and confidentiality clauses in employee severance agreements, and (b) the Federal Trade Commission’s (“FTC”) recent proposal to ban non-compete agreements.

On February 21, 2023, the NLRB issued a decision in McLaren Macomb, 372 NLRB No. 58 (2023) holding that employers may not offer employees severance agreements that include non-disparagement and confidentiality clauses that could potentially limit the former employees’ ability to exercise their Section 7 rights under the National Labor Relations Act (“NLRA”). In particular, the NLRB ruled that the following provisions in the subject severance agreement were unlawful due to their potentially chilling affect on employees trying to engage in concerted action:

6. 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 purpose of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.

7. 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 time 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 parents and affiliated entities and their officers, directors, employees, agents and representatives.

The McLaren Macomb decision does not solely apply to unionized workforces, but applies to private workforces without unions as well. Section 7 rights include, but are not limited to the rights to assist employees of the subject employer with their complaints about working conditions. The NLRB found that the provisions have a “reasonable tendency to interfere with, restrain, or coerce employees in the exercise of their Section 7 rights.” In doing so, the Board reiterated that ‘it is axiomatic that discussing terms and conditions of employment with coworkers lies at the heart of protection Section 7 activity.’ Citing St. Margaret Mercy Healthcare Centers, 350 NLRB 203, 205 (2007), enfd. 519 F.3d 373 (7th Cir. 2008). Moreover, the Board opined that the mere proffer of the severance agreement itself with those provisions violates Section 8(a)(1) the NLRA because it “has a reasonable tendency to interfere with or restrain the prospective exercise of Section 7 rights, both by the separating employee and those who remain employed.” The Board also mentioned that the non-disparagement clause above was not limited in terms of its temporal scope. Likewise, the Board opined that the confidentiality provision would deter the employee from assisting a Board investigation into the employer’s proffering of an unlawful disparagement provision, interfering with the employee’s statutory rights.

Provisions such as those specified above are often common in severance agreements. Accordingly, employers will want to have an employment lawyer review their existing severance agreements moving forward so that they can carve out specific language to ensure that the employer’s severance agreement will be upheld as lawful and not subject the employer to a potential unlawful labor practice under Section 8 of the NLRA leading to the potential payment of fines as well as costly defense fees.

McKellar Poursine, PLLC is available to review your severance agreements to ensure compliance with the law. An appointment may be made by calling (305) 721-2954.

Coverage of the FTC’s proposal to ban non-compete agreements will be covered in a separate post.