Take the Off-the-Shelf Employment Agreements… Off the Shelf

This is your reminder — always have counsel review and revise every agreement before offering it to an employee. A number of new decisions and laws have made many standard employment agreements, restrictive covenant agreements, separation agreements, and settlement agreements completely unenforceable. Below are a few examples…

The McLaren Macomb NLRB Decision

As we discussed at our recent breakfast seminar, the McLaren Macomb case, decided February 21, 2023 by the National Labor Relations Board (“NLRB”), created new standards for confidentiality, non-disparagement, and non-disclosure provisions contained in agreements with certain employees. More specifically, the NLRB ruled that such provisions, when drafted too broadly, can illegally restrict both unionized and non-unionized employees’ ability to discuss and improve their working conditions in violation of Section 7 of the National Labor Relations Act (“NLRA”).

In addition to the McLaren Macomb decision, NLRB General Counsel Jennifer Abruzzo issued a Memorandum to all NLRB Field Offices with some guidance for employers to utilize in light of the Board’s decision. General Counsel Abruzzo’s Memo warns that other provisions in employment agreements, such as “non-compete clauses; no solicitation clauses; no poaching clauses; broad liability releases and covenants not to sue,” among others, may be in violation of the NLRA if such provisions are drafted broadly to have a chilling effect on an employee’s Section 7 rights.

It is important to note that the NLRA’s protections do not extend to independent contractors, most managers and supervisors, public sector employees, most agricultural workers and workers covered by the Railway Labor Act. But employers need to know that they may be violating the NRLA by merely offering a broadly drafted severance agreement to a covered employee.

Even more reason for caution -> some plaintiffs’ attorneys are directing employees to file an unfair labor practice charge in the event they receive an offer to sign a broadly worded agreement.

Of course, there is no “one size fits all” solution, but there are several ways to limit the risk created by McLaren Macomb. As we arrive in this whole new world, employers should contact counsel before offering the next employment agreement.

See McLaren Macomb, 372 NLRB No. 58 (2023); MEMORANDUM GC 23-05

Recent Legislation Affecting Claims for Sexual Harassment/Assault

In effect as of December 7, 2022, the federal Speak Out Act invalidates any pre-dispute non-disparagement or non-disclosure agreement relating to sexual harassment or sexual assault. In addition, last year on March 3, 2022, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 went into effect, prohibiting employers from enforcing pre-dispute arbitration agreements and class action waivers that concern sexual harassment and sexual assault claims. These laws are part of Congress’ initiative to prevent employers from silencing the speech of sexual harassment and sexual assault victims.

It is important to note that the Speak Out Act does not apply to agreements resolving sexual harassment and sexual assault claims (whether or not a lawsuit is filed). Likewise, under the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, an employee and employer may still agree to arbitrate a sexual harassment claim after the employee asserts his/her claim.

Ultimately, these two laws only affect pre-dispute agreements containing arbitration agreements, class-action waivers, as well as non-disclosure and non-disparagement provisions. Employers using template agreements should be weary that such agreements may be unenforceable with respect to allegations of sexual assault and/or sexual harassment.

See 42 U.S.C. § 19403; See 9 U.S.C. § 401

Let’s Talk Soon…

One reason lawyers recommend having counsel review agreements on a case–by-case basis is that the law changes from moment to moment. So what’s next? The Federal Trade Commission (“FTC”) is currently reviewing 27,000 public comments submitted in response to its proposed rule to ban non-compete agreements nationwide. As employers await the FTC’s final vote on the non-compete ban, they should be reminded that the law affecting employment agreements evolves too quickly and too often to rely on template agreements.

Call counsel to look over any sample agreements before handing them to an employee.