Many employers use severance agreements as a tool to reduce legal exposure surrounding an employee separation. Such agreements typically involve a broad release of claims by the employee in exchange for severance from the employer. Employers also generally include terms to clarify post-separation obligations and ensure that once the employee and employer part ways, they will not meet again. Unfortunately, a recent decision by an NLRB judge may significantly diminish the value of such agreements by restricting the limitations an employer can impose on an employee’s post-termination activities. Quicken Loans v. Laff, Case No. 28-CA-146517 (3/17/16).
In this matter, an NLRB judge declared several boilerplate separation agreement terms a restriction on an employee’s Section 7 rights to engage in concerted activity:
- Confidentiality Clauses are Impermissible.
The separation documents required the employee to “keep secret all proprietary/confidential information, including client information, employee information, financial information, or any other internal information about Quicken Loans.” In Advance Transportation Co., 310 NLRB 147 (1993), the Board found it unlawful for an employer to prohibit discussion of company affairs and operations without defining the area of permissible conduct. Relying on that decision, the NLRB judge in Quicken Loans found that “the requirement to keep secret employee information is so broad as to potentially encompass directly Section 7 activity and could reasonably be construed by employees to restrict Section 7 activities.”
- An Employee Can’t Be Required to Return Company Property.
The NLRB’s General Counsel argued that a provision requiring the return of company property was overly broad because it restricted employees from providing employee handbooks to government agencies. The judge agreed. He concluded the language was at the very least “ambiguous,” absent an exception permitting the provision of company property to a government agency for lawful investigative purposes. It was therefore “susceptible to the reasonable interpretation that it bars Section 7 activity.”
- An Employee Can’t Be Restricted from Contacting or Soliciting the Employer’s Employees or Clients For Any Reason.
In the most surprising part of the ruling, the NLRB judge ruled that a restrictive covenant was overly broad due to its prohibition on employees contacting other employees or clients “for any reason.” These types of restrictions are routinely included in separation agreements and employment contracts to prohibit departed employees from trying to “poach” former colleagues and clients. Quoting Quicken Loans, Inc., 359 NLRB No. 141 (2013), the judge iterated that “within certain limits, employees are allowed to criticize their employer and its products as part of their Section 7 rights, and employees sometimes do so in appealing to the public, or to their fellow employees, in order to gain their support.”
In short, the decision is a blow to employers and another example of the NLRB’s efforts to restrict employer actions far removed from union-related conduct. Businesses should be able to rely on such agreements without fear that terms favorable to an employer will be invalidated. This decision makes that difficult to do.