News & Insights

Examining the impact on employee rights and employer disciplinary measures

Recently, the National Labor Relations Board (the “NLRB” or “Board”) has taken a very broad view of employees’ rights under the National Labor Relations Act (the “NLRA” or the “Act”).  Specifically, the Board and its General Counsel, Jennifer Abruzzo, have scrutinized the use of common terms found in separation, restrictive covenant, and other employment agreements, such as non-compete, confidentiality, and non-disparagement provisions. Moreover, the NLRB has restricted an employer’s ability to discipline employees who engage in misconduct while also engaging in protected activity.At the heart of these Board actions is Section 7 of the NLRA, which allows covered employees to self-organize; form, join or assist labor organizations; bargain collectively; and “engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection” or to refrain from such activities in most circumstances. The Board has broadly interpreted Section 7 rights to include not only a right of employees to discuss wages, hours, working conditions, and other terms and conditions of their employment with one another, but also to engage in communications with third parties related to an ongoing labor dispute, provided the communication is not so “disloyal, reckless, or maliciously untrue to lose the Act’s protection.”It is an unfair labor practice (“ULP”) for an employer to “interfere with, restrain, or coerce” employees in exercising their Section 7 rights or to discharge or discriminate against covered employees for filing  ULP charges with the Board, assisting others in making a charge or assisting the NLRB in investigating charges. The NLRA applies to the vast majority of private-sector employers and protects both unionized and non-unionized workforces. Properly classified independent contractors and most supervisory employees, though, are not protected by the NLRA.

On February 21, 2023, in McLaren Macomb, the NLRB held that broad non-disparagement and confidentiality provisions in separation agreements with covered employees are unlawful under the NLRA. Specifically, the Board evaluated whether the provisions in an employer’s separation agreement that prevented non-supervisory employees from disclosing the terms of the agreement or making statements that could harm the image of the employer violated the employees’ Section 7 NLRA rights. The NLRB held that the separation agreements at issue were unlawful because they had a reasonable tendency to interfere with, coerce, or restrain employees from freely exercising their NLRA rights, such as “assisting coworkers with workplace issues concerning their employer, and . . . communicating with others, including a union, and the Board, about [their] employment.”

According to the NLRB in McLaren Macomb, the fact that an employer did not intend to coerce or succeed in coercing an employee not to exercise Section 7 rights is not dispositive. Instead, “it is the high potential that coercive terms in separation agreements may chill the exercise of Section 7 rights that dictates the Board’s traditional approach of viewing severance agreements requiring the forfeiture of Section 7 rights—whether accepted or merely proffered—as unlawful unless narrowly tailored.”

In other words, an employer cannot defend itself from a ULP charge by simply pointing out that an employee did not accept an illegal separation agreement or that the employer had not tried to enforce impermissible non-disparagement or confidentiality terms in an accepted agreement; merely offering an employee an illegal separation agreement can be a violation of Section 7.

Since the McLaren Macomb ruling, the NLRB’s General Counsel has issued two memoranda addressing that decision. First, in a memorandum on March 22, 2023, she stated that in addition to confidentiality, non-disclosure, and non-disparagement provisions being “problematic,” she believes “some other provisions that are included in some severance agreements might interfere with employees’ exercise of Section 7 rights, such as: non-compete clauses; no solicitation clauses; no poaching clauses; broad liability releases and covenants not to sue that may go beyond the employer and/or may go beyond employment claims and matters as of the effective date of the agreement; cooperation requirements involving any current or future investigation or proceeding involving the employer as that affects an employee’s right to refrain under Section 7, such as if the employee was asked to testify against co-workers that the employee assisted with filing a ULP charge.”

Then, in a memorandum issued May 30, Ms. Abruzzo further explained that it is her position that non-compete agreements (whether they appear in separation agreements or otherwise) interfere with employees’ exercise of Section 7 rights and, as a result, “[e]xcept in limited circumstances,” an employer who “proffer[s], maintain[s] or enforce[s] such agreements” with respect to non-supervisory employees engages in a ULP. In the General Counsel’s opinion, not only is a desire to avoid competition not a legitimate business interest that could justify a “special circumstances defense,” neither is an interest in retaining employees or protecting an employer’s investment in training employees.

Moreover, it is her opinion that an employer would be unlikely to justify a non-compete that is imposed on low- or middle-wage workers who do not have access to trade secrets “or other protectible interests.” On the other hand, she stated that “provisions that clearly restrict only individuals’ managerial or ownership interests in a competing business, or true independent-contractor relationships” may not violate the Act. Finally, she vaguely stated that there may be other (undefined) “special circumstances” in which a narrowly tailored non-compete agreement with a non-supervisory employee is justified.

Lastly, on a separate but related note, in its Lion Elastomers decision issued May 1, 2023, the NLRB addressed when employee misconduct occurring while the employee is engaged in Section 7 activity loses the protections of the Act, enabling an employer to terminate or discipline the employee. Pursuant to Lion Elastomers, the Board will evaluate whether an employee’s misconduct directed towards management in the workplace that occurs during Section 7 activity forfeits the NLRA’s protection by considering:

(1) The place of the discussion;
(2) The subject matter;
(3) The nature of the employee’s outburst; and
(4) Whether the employee outburst was provoked by a ULP.

In evaluating whether employee statements on social media or made to other employees in the workplace forfeit NLRA protection, the Board will consider the totality of the circumstances. Finally, in determining if an employee forfeits NLRA protection for  misconduct on a picket line, the NLRB will consider whether “under all of the circumstances, non-strikers reasonably would have been coerced or intimidated by the picket-line conduct.” Significantly, under these setting-specific standards, an employer can be liable for disciplining or terminating an employee who engages in misconduct while engaged in Section 7 activity, even if the employer would have taken the same disciplinary measure against the employee in the absence of Section 7 activity.

Simply put, these recent rulings by the NLRB and opinions from its General Counsel make it more difficult for employers to protect their legitimate business interests relating to their non-supervisory employees, which is why up-to-date advice from employment counsel is imperative when evaluating these issues.