The NLRB Restricts Employer Rights Again: Finding Typical Separation Agreement Terms Unlawful and Protecting Employees Who Make Secret Recordings

The NLRB Restricts Employer Rights Again: Finding Typical Separation Agreement Terms Unlawful and Protecting Employees Who Make Secret Recordings

The National Labor Relations Board (the “NLRB” or the “Board”) recently issued two important decisions, one finding unlawful non-disparagement and confidentiality provisions typically found in separation agreements, and the other protecting employees who make secret recordings at work.  These decisions continue a trend by the Board to issue decisions expanding employee rights under the National Labor Relations Act (the “Act”). 

The first decision, issued on February 23, 2023, involved McLaren Macomb’s (“McLaren”) use of non-disparagement and confidentiality provisions in separation agreements offered to employees who were permanently furloughed due to the COVID-19 pandemic.  Under the standard in effect when the Board heard the McLaren case, non-disparagement and confidentiality provisions as found in the separation agreements were lawful.  The Board overturned the prior standard and held that confidentiality and non-disparagement provisions are unlawful if they could be read to restrain, coerce, or interfere with an employee’s exercise of his or her rights under the NLRA to engage in, or refrain from engaging in, certain activities such as filing unfair labor practice charges, participating in investigations by the Board, or participating in collective activity to improve wages, hours, or working conditions.  Applying this standard, the Board held that the confidentiality provision used by McLaren was unlawful because it restricted employees from discussing the terms of their separation agreement with anyone except the employee’s spouse, legal counsel, or tax advisor.  According to the Board, such restrictions unlawfully interfered with an employee’s right to discuss the agreement’s terms with other employees who were considering similar agreements, and also had a tendency to coerce an employee against filing an unfair labor practice charge or participating in an investigation of a charge.  Similarly, the Board found McLaren’s non-disparagement provision unlawful because it tended to coerce employees from raising concerns about potential unfair labor practices by prohibiting them from making any statements to fellow employees, or the general public, that could harm McLaren’s image. 

The terms found in McLaren’s separation agreements were typical of those found in most of these types of agreements.  Therefore, the NLRB’s holding has broad implications to any employer using separation agreements, likely, rendering those agreements unlawful.

The second decision, issued on February 13, 2023, involved workplace recordings secretly made by two employees of Starbucks Corporation (“Starbucks”) at a Starbucks location in Philadelphia, Pennsylvania.  The employees, who were engaged in union activity, admittedly recorded discussions with their manager without the manager’s consent or knowledge.  The recordings violated Starbucks’ workplace rules.  In addition, because it is a two-party consent state, the employee’s secret recordings violated Pennsylvania law.  After Starbucks discharged the employees for reasons unrelated to the recordings, the employees filed an unfair labor practice charge seeking reinstatement and backpay.  Starbucks argued that the recordings violated Starbucks’ written policy and Pennsylvania law and, therefore, justified the employees’ terminations.  The Board disagreed and, instead, ordered that Starbucks reinstate the employees.  According to the Board, the employees’ recordings were protected by the NLRA because they were made to preserve evidence for use in a possible unfair labor practice charge.  According to the Board, the protections afforded by the Act trumped Starbucks’ no-recording policy, and the Act itself preempted Pennsylvania state law such that it could not be invoked against the employees on the issue of reinstatement.  In sum, the Board found that the employees’ secret recordings of their manager constituted protected activity under the NLRA despite them violating Starbucks’ policy and being illegal under Pennsylvania state law. 

Based on the Board’s two recent decisions, as discussed above, employers should review with labor counsel any confidentiality or non-disparagement provisions they include in separation agreements or other documents or policies, such as employee handbooks, to ensure legal compliance.  Importantly, the Board has narrowed the scope of such provisions, as opposed to banning them outright.  Accordingly, it is essential that employers ensure that such provisions are carefully drafted to maximize their effect and the likelihood of them being upheld by the Board if challenged.  Similarly, employers should review any written policies they maintain on recordings in the workplace to ensure that such policies are drafted and enforced in manner that is consistent with the Board’s decision in Starbucks.  Furthermore, employers should consult with legal counsel prior to terminating any employee for violating a no-recording policy. 

As always, if you have any questions or need any assistance regarding these matters, please do not hesitate to contact Masud Labor Law Group.