Corporate & Securities Blog

Three Practical Steps: Response to the NLRB Decision on Confidentiality Restrictions

The National Labor Relations Board (NLRB) is a federal agency with the power to safeguard union organizing rights and to remedy unfair labor practices. Its reach goes beyond just those employers with unionized workforces and impacts most private-sector employers.

Recently, the NLRB issued a decision finding that overly broad confidentiality and non-disparagement clauses in severance agreements run afoul of the National Labor Relations Act.

Following the NLRB decision, the General Counsel of the NLRB published a broader interpretative memorandum. While the memorandum does not have the same force of law as a formal decision by the NLRB, it provides a window into the NLRB’s enforcement position.

Three practical steps for businesses seeking to navigate between the position of the NLRB and contractual protections against misuse of competitive information include:

Update Existing Templates. Review and update existing confidentiality and non-disparagement clauses in template severance agreements, employment agreements and handbooks. While the NLRB decision focused on severance agreements, the General Counsel’s memorandum and another pending decision from the NLRB likely will expand the scrutiny beyond severance agreements.

Examples of areas for more careful review include:

  • Are covenants overly broad and generic, or are they appropriately tailored to the business in order to protect intellectual property, trade secrets and other proprietary information?
  • Are the appropriate employees signing the right templates? For example, while an executive severance agreement may require a broader non-disparagement covenant, the same concern may not apply to the separation of an entry-level employee.
  • Do different templates send mixed messages, or are they consistent?
  • Are there exceptions included that the NLRB or other regulators would expect to see to avoid interfering with employee rights or the regulator’s oversight?
  • Do contracts include severability clauses that seek to prevent voiding the entire agreement if only one provision is found unlawful?

Consider a Disclaimer. While the General Counsel of the NLRB continues to advocate for a universal model disclaimer for use by all employers, the NLRB has yet to adopt that position or a specific form of disclaimer.

As advised by the NLRB’s General Counsel:

While specific savings clause or disclaimer language may be useful to resolve ambiguity over vague terms, they would not necessarily cure overly broad provisions. The employer may still be liable for any mixed or inconsistent messages provided to employees that could impede the exercise of Section 7 rights. As noted in my Stericycle brief to the Board regarding employer rules, I asked it to formulate a model prophylactic statement of rights, which affirmatively and specifically sets out employee statutory rights and explains that no rule should be interpreted as restricting those rights, that employers may—at their option—include in handbooks in a predominant way to mitigate the potential coercive impact of workplace rules on the exercise of Section 7 rights and simplify compliance, which could also easily apply to severance agreements.

I noted that the description of statutory rights should focus on Section 7 activities that are of primary importance toward the fulfillment of the Act’s purposes, commonly engaged in by employees (particularly in non-union workplaces, since they do not have union representatives available to bargain over rules and guide employees as to their rights), and likely to be chilled by overbroad rules, and provided suggested model language for inclusion to make it clear to employees that they had rights to engage in: (1) organizing a union to negotiate with their employer concerning their wages, hours, and other terms and conditions of employment; (2) forming, joining, or assisting a union, such as by sharing employee contact information; (3) talking about or soliciting for a union during non-work time, such as before or after work or during break times, or distributing union literature during non-work time, in non-work areas, such as parking lots or break rooms; (4) discussing wages and other working conditions with co-workers or a union; (5) taking action with one or more co-workers to improve working conditions by, among other means, raising work-related complaints directly with the employer or with a government agency, or seeking help from a union; (6) striking and picketing, depending on its purpose and means; (7) taking photographs or other recordings in the workplace, together with co-workers, to document or improve working conditions, except where an overriding employer interest is present; (8) wearing union hats, buttons, t-shirts, and pins in the workplace, except under special circumstances; and (9) choosing not to engage in any of these activities.

While a disclaimer may not be a cure-all, employers should consider whether to adopt an interim disclaimer now or wait for further NLRB decisions and guidance.

Set an Enforcement Strategy. Establish a process so that, prior to seeking to enforce a confidentiality or non-disparagement agreement (whether by legal action, demand letter or adverse employment action), appropriate review by human resources or legal advisors occurs. It is increasingly important that strategy aligns with the most up-to-date legal positions, which include not only decisions by the NLRB but also a network of other federal and state laws, regulatory opinions and court decisions.

Author

A. Nicole Stover

Vice Chair, Litigation

Nicole Stover is a strategic business partner to corporate, non-profit, and executive clients in all areas of employment law, including competition and trade secrets, mergers and acquisitions, discrimination and harassment, compensation and
benefits, and pandemic-related impacts.

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