ALJ Finds Employer Violated Federal Law By Reinstating Employee Subject To A Last Chance Agreement Containing A Broad Non-Disparagement Provision

Clifford Geiger
Clifford Geiger
04/13/2023

The recent case Challenge Mfg. Holdings, Inc., Case 07-CA-286573 (2023), demonstrates how some judges may apply the National Labor Relations Board’s recent decision in McLaren Macomb, 372 NLRB No. 58 (2023), which held that an overly broad non-disparagement provision in a severance agreement was unlawful under the National Labor Relations Act (the “Act”).

The provision at issue in McLaren Macomb prohibited employees who accepted severance from making any statements to other employees or to the general public which could disparage or harm their former employer’s image. The Board noted this restriction “would encompass employee conduct regarding any labor issue, dispute, or term and condition of employment.” As such, McClaren Macomb held “[t]he nondisparagement provision on its face substantially interferes with employee rights, under Section 7 of the Act, to “tell the public about their wages, hours and working conditions.”

Generally, Section 7 of the Act guarantees employees “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,” as well as the right “to refrain from any or all such activities.”  Section 7 has been interpreted to protect an employee’s right to criticize an employer’s labor practices, as well as to make statements about wages, hours, and other terms and conditions of employment.

In Challenge Mfg. Holdings, Inc., Administrative Law Judge Keltner Locke addressed an unfair labor practice charge filed by Kahdeijra Lashay Gee against her employer. Gee was terminated for a violation of workplace rules, and she grieved the termination through her Union. The Company and Union subsequently reached an agreement under which the Gee was reinstated subject to a last chance agreement. The agreement provided, as such agreements typically do, that if Gee violated any of its terms she would be fired and would not have access to the grievance process.  One of the terms of this agreement prohibited Gee from disparaging her employer on social media.

Locke found that the Company violated the Act by requiring Gee to sign the last chance agreement, because the non-disparagement provision was unlawful under McLaren Macomb. Locke found, as did the Board in McLaren Macomb, that nothing in the last chance agreement defined “disparage,” and no exception was provided to allow criticisms about terms and conditions of employment. Locke wrote, [b]ecause nothing in the last chance agreement put the reader on notice that the prohibition did not extend to complaints about terms and conditions of employment, a reasonable employee would conclude she would not have the right to make such complaints on social media, even if she were speaking on behalf of other workers or speaking with them online.”

Thus, Locke ruled the Company committed an unfair labor practice by conditioning Gee’s reinstatement on a waiver of her Section 7 rights. Locke ordered the Company to remove from any last chance agreement then in effect, or to be used in the future, the provision prohibiting an employee from disparaging the Company on social media. Alternatively, Locke ordered the Company to add qualifying language to its last chance agreements making it clear that the prohibition against disparagement does not apply to statements concerning the Company’s labor relations policies and practices, or to statements about wages, hours, and other terms and conditions of employment.

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