Tag: unfair labor practice

March 30, 2023

NLRB Deems Many Severance Agreements Unlawful

A February 21, 2023, decision by the National Labor Relations Board found it unlawful for employers to include some routine provisions in severance agreements. NLRB General Counsel Jennifer Abruzzo issued a memorandum dated March 22, 2023, elaborating on her broad interpretation of the ruling. Consequently, employers may now face federal labor law claims if they even offer a severance agreement to an employee that includes previously common restrictions.

McClaren Macomb Decision

In McClaren Macomb, 372 NLRB No. 58, the NLRB found that a hospital committed an unfair labor practice in violation of the National Labor Relations Act merely by offering a severance agreement to 11 permanently furloughed employees. The NLRB deemed the proposed agreements unlawful because they contained these non-disclosure and non-disparagement provisions:

“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.

The severance agreement also identified penalties if the employee violated those provisions, including paying the employer’s attorneys fees.

The Board held that these provisions unlawfully interfere with employees’ exercise of rights protected by Section 7 of the NLRA. Section 7 rights include protection for employees engaging in concerted activity for their mutual aid and protection. The NLRB emphasized that just offering the agreement was unlawful even though the employees didn’t sign it and thus didn’t become bound by its terms.

General Counsel Memorandum 23-05

General Counsel Abruzzo has already established through earlier actions and memorandums that she has extremely pro-labor views of the NLRA. She demonstrated these sentiments again through this memorandum elaborating on the Board’s McClaren Macomb decision. Though not formally binding, the GC’s memo establishes her prosecutorial viewpoint and puts employers on notice that she will challenge a broad array of severance agreement provisions.

Here are summarized versions GC Abruzzo’s answers to the following questions:

Are severance agreements now banned?

No, as long as they’re limited to a release of the signing employee’s employment claims arising before the date of the agreement. But once seemingly any of the various other common components of severance agreements are added, her view shifts.

Do the circumstances surrounding the severance offer matter?

Probably not, as “an employer can have no legitimate interest in maintaining a facially unlawful provision in a severance agreement.”

What if the employee doesn’t sign the agreement?

As the Board held, it doesn’t matter. “[T]he proffer itself inherently coerces employees by conditioning severance benefits on the waiver of statutory rights such as the right to engage in future protected concerted activities and the right to file or assist in the investigation and prosecution of charges with the Board.”

What about severance agreements offered to supervisors?

Even these may be unlawful. Typically, the NLRA doesn’t protect “supervisors,” as defined by the law. However, the GC still has a (highly dubious) theory of how offering a severance agreement with prohibited language to a supervisor nonetheless constitutes an unfair labor practice.

How does this affect severance agreements before the February 2023 McClaren Macomb decision?

They could also be challenged. The GC even suggests she could prosecute back beyond the standard 6-month NLRA statute of limitations where the severance agreement provisions have ongoing effect. She notes that the NLRB has “settled cases involving severance agreements which had unlawfully broad terms that chilled the exercise of Section 7 rights by requiring the employer to notify its former employees that the overbroad provisions in their severance agreements no longer applied.” But she does not guarantee that would be the extent of the potential penalties.

Would the entire severance agreement be null and void due to just one overbroad provision?

It depends. The GC suggests the NLRB “generally make[s] decisions based solely on the unlawful provisions and would seek to have those voided out as opposed to the entire agreement, regardless of whether there is a severability clause or not”. She further offers that “while it may not cure a technical violation of an unlawful proffer, employers should consider remedying such violations now by contacting employees subject to severance agreements with overly broad provisions and advising them that the provisions are null and void and that they will not seek to enforce the agreements or pursue any penalties, monetary or otherwise, for breaches of those unlawful provisions.”

Why does the NLRA protect former employees in this situation?

Good question. Because the Board said so. But the GC adds, “In addition, former employees can play an important role in providing evidence to the NLRB and otherwise sharing information about the working conditions they experienced, in a way that constitutes both mutual aid and protection.”

Can the NLRB come between private contracting parties?

Yes, though the General Counsel doesn’t really answer that. Instead, she shifts the focus to the Board’s role “to address the inequality of bargaining power between employees, who do not possess full freedom of association or actual liberty of contract, and their employers . . . .”

What if employees request broad confidentiality or non-disparagement clauses?

They can ask, but the employer can’t provide it. Per the GC, “In that unlikely scenario, I would reiterate that the Board protects public rights that cannot be waived in a manner that prevents future exercise of those rights regardless of who initially raised the issue.” She also notes that unions could not waive these rights on behalf of employees.

What about other forms of employer-employee communications?

Pre-employment agreements or offer letters could be unlawful on the same theories as severance agreements.

Could any confidentiality provision in a severance agreement be lawful?

Yes, but not really. “Confidentiality clauses that are narrowly-tailored to restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications may be considered lawful.” Such restrictions were likely already in place before the severance agreement, which may only be restating them for clarification/reiteration. The typical purpose of a confidentiality agreement in a severance agreement, especially if used to settle a pending claim, is to prevent public dissemination of information related to the employee’s potential claims against the employer. Any such restrictions would now likely violate McClaren Macomb.

Could any non-disparagement provision in a severance agreement be lawful?

Yes, but not really. “[A] narrowly-tailored, justified, non-disparagement provision that is limited to employee statements about the employer that meet the definition of defamation as being maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity, may be found lawful.” That is a non-defamation provision, not a non-disparagement provision. And state laws already protect against defamation, so there’s probably not much to be gained by putting such a clause in a severance agreement–especially at risk that the GC will somehow still find it’s overbroad.

Would a savings clause or disclaimer save overbroad provisions in a severance agreement?

Probably not. The General Counsel might be somewhat persuaded by a very extensive recitation of all possible rights protected by the NLRA and clear language that no such rights are being limited. However, there’s no guarantee that will help, and it’s unlikely many employers would be interested in taking that approach.

Does the GC view any other common severance agreement provisions as problematic?

Yes, of course. In particular, she points to non-compete clauses; no solicitation clauses; no-poaching clauses; broad liability releases and covenants not to sue; and cooperation requirements. There’s hope some of these might be acceptable in some situations, but employers proceed at their own risk.

Employer Response

What does all of this mean? Private companies in the U.S. have reason to fear that the NLRB will object to the severance agreements they’ve regularly used in the past. The same legal issues likely apply to settlement agreements used to resolve pending lawsuits and administrative proceedings.

If you use severance agreements with your separating employees, you should review them and reconsider your approach given these new pronouncements. However, that doesn’t necessarily mean every employer should adopt new agreements that don’t include confidentiality, non-disparagement, and other potentially challengeable provisions. NLRB rulings are not final, and there may be court challenges to the theories applied in McClaren Macomb and by the General Counsel. But it is critical to carefully weigh the risks and rewards of various approaches with the assistance of experienced labor counsel.

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April 1, 2021

Acting NLRB GC Announces Aggressive Enforcement Policy

In a memorandum dated March 31, 2021, the Acting General Counsel of the National Labor Relations Board, Peter Sung Ohr, proclaimed that the agency would enforce a key federal labor law more ardently than had his predecessor. The subject of the memo itself is telling: “Effectuation of the National Labor Relations Act Through Vigorous Enforcement of the Mutual Aid or Protection and Inherently Concerted Doctrines”. This action signals an aggressive enforcement policy against private-sector employers, whether currently unionized or not.

Legal Foundation

Section 7 of the National Labor Relations Act (NLRA) generally provides that:

Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all of such activities. . . .

This provision protects private-sector (e.g., non-governmental) employees whether they belong to a union or not. In addition to permitting unionization, Section 7 prohibits discrimination against employees who work together to improve working conditions.

Increasingly, the National Labor Relations Board has disagreed over the extent of these protections. The divide typically follows the political spectrum. Under a Democratic administration, the NLRB reads Section 7 more expansively in favor of workers. Republican administrations find the protections more limited, recognizing the inherent prerogative of business owners to control their enterprises.

Current NLRB Composition

The National Labor Relations Board “board” itself is comprised of five seats based in Washington, D.C. Each seat has a five-year term, with distinct expiration dates. As a result, control of the NLRB does not automatically shift with a change in presidential administrations.

President Biden entered office with only four of the five NLRB board seats filled. Three members are Republicans who President Donald Trump appointed. As the practice has been to have no more than three of the five seats filled by representatives of the president’s party, the fourth member is Democrat Lauren McFerran. Biden immediately named McFerran the new Chair of the NLRB, but has not yet filled the open seat. Republican William Emanuel’s term will expire on August 27, 2021. It is certain that Biden will not reappoint Emanuel at that time. Barring inability to gain Senate confirmation, both the currently vacant seat and Emanuel’s seat will be filled by Democrats. That will shift the Board to a pro-labor majority for the first time since August 2017.

The Board ultimately sets NLRB policy, primarily through adjudicating cases, but increasingly through formal rulemaking as well. However, it does not have absolute control of the NLRB’s activities. The General Counsel of the NLRB oversees the initial intake of cases and controls the prosecution of unfair labor practices. Accordingly, the GC has a pivotal function in guiding NLRB policy.

Breaking with historical practice, President Biden fired Trump’s Senate-confirmed General Counsel, Peter Robb, on his first day in office. Robb’s term wasn’t set to expire until November. Biden appointed Peter Sung Ohr as Acting GC. He has nominated Jennifer Abruzzo to fill the position on a permanent basis.

“Mutual Aid or Protection”

Reflecting a more aggressive enforcement policy, the Acting GC’s memo suggests an expansive view of what constitutes activities for employees’ “mutual aid or protection”. Indeed, he asserts, “employee advocacy can have the goal of ‘mutual aid or protection’ even when the employees have not explicitly connected their activity to workplace concerns”. In support of that conclusion, the memo references several cases decided by the NLRB when there was a Democratic majority.

According to the Acting GC, mutual aid or protection can extend to “employees’ political and social justice advocacy”. Among other examples, the memo points to “protests in response to a sudden crackdown on undocumented immigrants and the possible revival of workplace immigration raids” as conduct he would find protected by the NLRA because “the employees’ conduct . . . concerned issues within their employer’s control, like . . . willingness to hire immigrants.”

On such issues, the Acting GC effectively sets aside the views of the sitting NLRB majority: “I look forward to robustly enforcing the Act’s provisions that protect employees’ Section 7 rights with full knowledge that recent decisions issued by the current Board have restricted those protections”. The memo suggests that the NLRB will pursue cases falling in the gaps of the current majority’s reasoning regarding Section 7 rights, rather than directly rejecting it. However, there is much reason to be suspicious of that supposed distinction.

“Inherently Concerted”

After acknowledging that “[p]rotected, concerted activity . . . begins with a conversation among employees,” the Acting GC’s memo asserts that “contemplation of group action may be indicative of concerted activity, [but] it is not a required element.” He argues that certain issues “are pivotal” to employees’ common interests such that any group discussions about them are “inherently concerted,” again citing a case decided by a Democratic majority. Despite emphasizing “inherently concerted” to be a “settled doctrine,” the Acting GC concedes, “it remains better articulated as an alternative argument in cases where concert may be proven by traditional means.”

The memo further recognizes that the Board has only found discussions to be inherently concerted when they involve “certain vital categories of workplace life”. These categories primarily include wages and compensation. But the Acting GC suggests that discussions of work schedules, job security, workplace health and safety, and racial discrimination (presumably among others) may also qualify. In conclusion, the Acting GC reports that: “In the future, I will be considering these and other appropriate applications of the inherently concerted doctrine in suitable cases.”

Employers Be Warned

It is not surprising that Biden’s NLRB General Counsel will follow a more aggressive enforcement policy. Yet, it is noteworthy that the Acting GC has blatantly announced his intention to begin doing so before his permanent replacement is confirmed. He also does so under a Republican Board majority that will remain in place for several more months.

Expect the NLRB’s regional offices to pursue more cases against employers now to line them up for a new Board majority toward the end of the year. This approach will expedite the predictable shift in labor policy to favor unions and employees more than was the case under the Trump administration.

Companies should be cautious before disciplining employees for any activities that may run afoul of the aggressive enforcement policy reflected in the Acting GC’s memorandum. Management should work with experienced labor counsel to balance the risks in such scenarios.

Despite current favorable Trump-era precedents, employers might also consider reviewing their policies and procedures that may come under renewed NLRB scrutiny. Examples include social media policies, confidentiality policies, work rules, and investigation procedures. Employers facing or anticipating unionizing campaigns should prioritize such a review. Arguably-minor unfair labor practice allegations can have a significant adverse impact on businesses as fodder for organizing efforts.

Click here to download a copy of this March 31, 2021 Acting GC memorandum.

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July 17, 2018

NLRB Charges: What’s an Unfair Labor Practice?

The National Labor Relations Board’s General Counsel (through Regional Offices) investigates violations of the National Labor Relations Act. An Unfair Labor Practice (ULP) occurs when an employer or union violates Section 8 of the Act. Those affected by these violations, including nonunion employees, can bring NLRB charges against the offending party. The NLRB receives 20,000 to 30,000 charges a year from employers, employees, and unions. Employers should be aware of the most common board charges to help them reduce the chance of receiving one.

Common NLRB Charges Against Employers

Employers incur NLRB charges by interfering with employee rights to engage in concerted or union activity and engaging in “bad faith” collective bargaining. Common allegations against employers include threatening or disciplining employees for union activity and promises of certain benefits in exchange for employees not to engage in union activity. In collective bargaining, common allegations against employers include refusals to provide requested information, bargaining in “bad faith,” and attempting to negotiate directly with employees.

To lessen the chance of receiving charges, employers should train managers in complying with the Act. Furthermore, charges of “bad faith” bargaining do not mean employers cannot take a hard stance in negotiations or leave the bargaining table. However, an employer cannot bargain with no intention of actually reaching a deal.

It is also important for employers to be aware that the balance between employer and employee rights under the NLRB tends to fluctuate based on the political climate in Washington.

Common NLRB Charges Against Unions

Charges against unions are less common than allegations against employers. Common charges against unions include failure to represent an employee in a grievance and failure to bargain in “good faith”. It is also common for charges against unions to allege illegal coercion of employees, illegal picketing, secondary boycotts, and discrimination against employees. Both employers and employees can bring charges against unions.

Investigation Process

Once a charge is filed, the General Counsel investigates the allegation to determine whether there is reasonable cause to issue a complaint or dismiss the charge. The investigation is delegated to the Regional Director of the area where the alleged violation occurred, assuming the parties involved fall under NLRB jurisdiction. If the Regional Director decides to issue a complaint, an Administrative Law Judge will hear the case. As shown in the chart below, most charges result in withdrawal or settlement.

The NLRB encourages voluntary resolution throughout the investigation process. This includes an alternative dispute resolution (ADR) program which aids in settlement through mediation and arbitration. The NLRB recently announced an initiative to be more proactive in encouraging parties to participate in ADR.

Potential Consequences of NLRB Charges

In some cases, the NLRB’s General Counsel can seek a temporary injunction under Section 10(j) of the Act. Temporary injunctions are intended to stop ULPs and irreparable harm to employees during the litigation process. The Act defines 15 categories of labor disputes where temporary injunctions are appropriate, including secondary boycotts and hot cargo agreements. Temporary injunctions cease once the NLRB decides the case.

If the NLRB ultimately finds a violation, it can order reinstatement of employees, pay back pay, or other make-whole remedies. It can also issue informational remedies, such as requiring an employer to post notices in the workplace. The NLRB cannot assess pure penalties under the Act. It has no statutory power to enforce its decisions directly, but can seek enforcement through the federal court system.

The consequences of a charge also include the time and money spent during the investigation, adjudication, and litigation processes.

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