NLRB TAKES AIM AT EMPLOYERS

Over the past several months, the National Labor Relations Board (the “NLRB”) and its General Counsel have reversed course on various employment issues (discussed below) and how the NLRB intends to prosecute those issues.  These recent enforcement changes, among other things, impact the enforceability of non-compete provisions and confidentiality agreements, as well as employee misconduct decisions.  As the NLRB’s guidance affects both union and non-union workplaces, all employers should be aware of these changes and consider if and how they should alter their personnel procedures in response to them.

What is the NLRB?

The NLRB is a federal agency responsible for protecting and enforcing the National Labor Relations Act (“NLRA”).  Notably, the NLRA applies to unionized and non-unionized workplaces, but its protections generally only apply to non-supervisory employees.  As of late, the NLRB has been emphasizing the importance of protecting an employee’s rights under Section 7 of the NLRA, 29 U.S.C. § 157 (“Section 7”).  Section 7, among other things, protects an employee’s right to engage in “concerted activities,” which is interpreted to mean that employees are allowed to discuss the terms and conditions of their employment.  Section 8 of the NLRA, 29 U.S.C. § 158, makes clear that employer interference with an employee’s Section 7 rights is an unfair labor practice.  Penalties for violating the NLRA/engaging in an unfair labor practice can include worker reinstatement, backpay for discharged workers, and informational remedies such as posting of a notice.

Critically, NLRB guidance and decisions are not the law, and there is much debate over whether the NLRB’s recent guidance and decisions overstepped its authority to enforce NLRA. However, the NLRB is entitled to—and will—enforce its guidance and decisions unless and until they are overturned by a court.  Practically, this means that employers who choose not to comply with the recent NLRB guidance and decisions could incur significant expense if faced with an NLRB investigation, even if the NLRB’s guidance and decisions are later overturned.

Recent NLRB Decisions & Guidance

Non-Compete Provisions

On May 30, 2023, the NLRB’s General Counsel issued  guidance opining that non-compete provisions in employment contracts and severance agreements violate the NLRA except in limited circumstances.  The guidance argues that non-competes chill employees from exercising their Section 7 rights.  The guidance does not suggest that all non-compete provisions are violative of the NLRA; rather, non-compete provisions that clearly restrict “only individuals’ managerial or ownership interests in a competing business” or “true independent-contractor relationships” may be acceptable to the NLRB.

Employers should note that this guidance is separate from the Federal Trade Commission’s (the “FTC”) proposed rule banning non-compete provisions.  The FTC’s public comment period on the proposed rule ended on April 19, 2023. According to a report from Bloomberg Law, the FTC is not expected to vote on the final rule until 2024.  While the NLRB is a separate enforcement agency from the FTC, the General Counsel noted that both agencies agreed to an “interagency approach” in investigating “employer restrictions on employee rights.”

Confidentiality and Non-Disparagement Clauses

On February 21, 2023, the NLRB issued an opinion in McLaren Macomb which found that provisions of a severance agreement – a non-disparagement provision and a confidentiality provision restricting disclosure of the terms of the agreement – improperly interfered with the employees’ Section 7 rights.  After the McLaren decision was issued, the NLRB’s General Counsel then issued a guidance memorandum to the NLRB’s field offices that considerably extended the McLaren decision.  The guidance memo concluded, among other things, that broad confidentiality policies and provisions (in employment or separation agreements) are likely to be deemed violative of the NLRA, unless they are narrowly tailored to protect proprietary or trade secret information “for a period of time based on legitimate business justifications.”

As to non-disparagement provisions, the guidance noted that such provisions may be found lawful if they are 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…”  According to the guidance memo, a general savings clause, which generally states something to the effect that nothing in an agreement is intended to infringe on an employee’s rights under Section 7, will not save unlawful provisions.

Abusive Language in the Workplace

On May 1, 2023, in Lion Elastomers LLC, the NLRB overruled prior NLRB precedent regarding abusive language in the workplace, specifically on the issue of when an employee can be disciplined or terminated based on use of abusive language.  Rather than focus on the motive behind the language, the NLRB now uses setting-specific tests for evaluating whether an employer’s disciplinary action for abusive conduct violates the NLRA.  This change has the practical effect of protecting certain offensive or rude language in the workplace (i.e., an employer cannot discipline an employee for using it) if it comes within the scope of the NLRA. For example, an employee swearing while discussing the terms and conditions of their employment may be protected unless the language is egregious. Lion did not extensively comment on situations where an employer’s obligations under Title VII and other anti-discrimination laws conflict with an employer’s obligations under Lion.  When faced with certain situations (e.g., an employee’s use of a racial slur during a discussion about an employer’s wage rates) this decision could place employers in a tricky position when trying to comply with both anti-discrimination laws and the NLRB’s interpretation of the NLRA.

What To Do Next

It is expected that all the above agency decisions and guidance will be challenged in courts of law, and some of those appeals are already in progress.  While we wait for court decisions, employers should take multiple actions to determine how to proceed in the interim and to prepare in case courts uphold the NLRB’s guidance/decisions.  Employers should first review their employment agreements and policies to determine if they run afoul of the recent NLRB guidance/decisions.  Employers should then determine whether, and to what extent, they want to revise those policies and agreements while the NLRB’s recent decisions and guidance are appealed.  Employers may choose to take on the risk of an NLRB investigation in the hopes that courts will overrule the NLRB.  On the other end of the spectrum, employers may decide to take a conservative route and revise all policies and agreements applicable to non-supervisory employees to comply with the NLRB’s current positions.

Employers with questions regarding the recent NLRB guidance and decisions and/or looking for assistance in deciding how to proceed should contact Nikole Canute, Scott Dwyer, Nate Wolf, Kimberly Large, Dominic Clolinger, or Kathryn Zoller as soon as practicable.