The Employer E-Letter: Labor and Employment Law News
from the Duluth, Minnesota law firm of
Hanft Fride, A Professional Association.
Co-Editors, Scott A. Witty, firstname.lastname@example.org and Richard R. Burns, email@example.com, or 218.722.4766. Please feel free to forward this e-mail or share it with others. If there are other topics of interest to you or any other suggestions concerning this newsletter, please let us know.
- NLRB RULES OFFER OF SEVERANCE AGREEMENT WITH NON-DISPARAGEMENT AND CONFIDENTIALITY PROVISIONS UNLAWFUL
- FTC HEARS PUBLIC COMMENTS ON PROPOSED SWEEPING NON-COMPETE BAN
- LAPSE OF TIME NOT ALWAYS A DEFENSE
- 9TH CIRCUIT TEMPORARILY BLOCKS CALIFORNIA BAN ON MANDATORY ARBITRATION PROVISIONS
- Tip Of The Month
NLRB RULES OFFER OF SEVERANCE AGREEMENT WITH NON-DISPARAGEMENT AND CONFIDENTIALITY PROVISIONS UNLAWFUL
The National Labor Relations Board recently concluded that an employer’s proffer of a severance agreement containing unlawful non-disparagement provisions constituted a violation of Section 8(a)(1) of the National Labor Relations Act, reversing Board decisions issued during the Trump administration. The severance agreement at issue was offered to eleven permanently furloughed employees following COVID-19 pandemic restrictions. The agreement contained a release of claims as well as customary non-disparagement and confidentiality provisions that employees would have to agree to in order to receive the severance payment offered. Under a Trump administration policy, there were two decisions that stated that such agreements are legal if they are voluntary, limited to post-employment activities, and the worker offered the deal was not fired illegally. A second decision suggested that the employee’s waiver of Section 7 rights are permissible under those defined circumstances. The employees claimed the non-disparagement and confidentiality provisions contained in the severance agreement unlawfully restrained the laid off employees’ Section 7 rights to self-organize, collectively bargain and engage in concerted activities relating to the unionization or the employees’ mutual aid or protection. Under Board precedent created during the Trump administration, the Administrative Law Judge first reviewing the claim found the non-disparagement and confidentiality provisions lawful, and thus the severance offer was also lawful. On review of the ALJ’s decision, the Board decided that the act of offering a severance agreement containing unlawful provisions can, by itself, be a violation of Section 8, which overruled a Trump-era precedent. The Board went on to rule that the non-disparagement and confidentiality provisions contained in the severance agreements at issue were unlawful based on new analysis focused on whether the offer has a “reasonable tendency to interfere with, restrain or coerce the employee’s exercise of NLRA rights.” Thus the offering of the agreement was found to be a violation of the NLRA. Employers are encouraged to review their standard severance agreements for non-disparagement and confidentiality provisions and have those reviewed by counsel if the employer desires to maintain such provisions in a severance agreement offered to an employee. McComb and Local 40 RN Staff Council, Office and Professional Employees, International Union, AFL-CIO, Case 07-CA-263041 (Feb. 21, 2023)
FTC HEARS PUBLIC COMMENTS ON PROPOSED SWEEPING NON-COMPETE BAN
On February 16, the FTC held an online public forum where it heard a variety of opinions and interests concerning its proposed rule, which would require employers to rescind nearly all current non-compete agreements with their employees and prohibit future non-competes. Employee advocates were largely unified in their support for the rule. Kevin Borowske, a former healthcare aide, opined that noncompete agreements “mean… you can’t do the work you’re most skilled at. It’s another way corporations are rigging the system to make sure workers can’t seek out better pay and conditions.” Doctor Sameer Baig noted that noncompetes have contributed to a physician shortage by allowing “healthcare organizations to create oligopolies and carve out territories, not much different than drug cartels.” Some employers also supported the ban. CEO Ross Baird argued that noncompetes contribute to declines in entrepreneurship and free enterprise because new businesses are unable to recruit top talent restricted by noncompete agreements. Still, many voiced their opposition. Some argued “a blanket, one-size-fits-all regulation prohibiting such agreements across the board…would have a detrimental effect on the ability of companies to implement leadership structures, invest in new technologies, and retain key executives.” Emily Glenning of BAE Systems opined that noncompetes provide enhanced protections for businesses, stating that “if you share your most confidential information with your employee, how do you protect when she’s working for your competitors? You can have her sign a non-disclosure agreement… but because you can’t monitor the conduct, you can’t know what she’s disclosing.” The FTC is set to decide whether to amend or implement the rule later this year.
LAPSE OF TIME NOT ALWAYS A DEFENSE
A district court in Minnesota recently found against the Mayo Clinic in a pregnancy discrimination case. The plaintiff employee testified that when she was about to go on maternity leave she was told by a mentor doctor that it would be detrimental to her to take twelve weeks of her maternity leave given her upcoming promotion, and also that it may upset two of her colleagues. This statement was made not by a direct decisionmaker, but the mentor doctor “took part” in the promotion decision-making process. The court had little difficulty in determining there was a causal link between the plaintiff’s maternity leave and the defendant’s decision not to promote her. The court determined this statement showed that a discriminatory attitude was more likely than not a motivating factor in the employer’s decision. The fact there was an eight-month period between the statement and the failure to promote was not determinative and renders discussion of pretext under the McDonnel Douglas framework unnecessary. The court noted only when we are talking about patterns of stray comments do we find at all persuasive a significant time lapse. Racz v. Mayo Clinic, No. 21-CV-01132, (D. Minn. February 7, 2023).
9TH CIRCUIT TEMPORARILY BLOCKS CALIFORNIA BAN ON MANDATORY ARBITRATION PROVISIONS
In 2019, California enacted AB 51, which effectively prohibits employers from requiring mandatory arbitration clauses as a condition of employment. In response, the US Chamber of Commerce sued, requesting a temporary injunction to prevent enforcement of the law. The Chamber argued AB 51 was invalid under the Federal Arbitration Act (FAA), which requires states to treat arbitration agreements on “equal footing” with other contracts. California argued that the FAA only requires states to equally enforce arbitration contracts, and that AB 51 does not bar enforcement of arbitration contracts, but only discourages parties from entering them. The Ninth Circuit disagreed with California, holding that since Congress intended the FAA to favor arbitration generally, the equal footing principle “is not limited to state rules affecting the enforceability of arbitration agreements, but also extends to state rules that discriminate against the formation of arbitration agreements.” Based on this reasoning, the court found that AB 51’s provisions discourage the formation of arbitration contracts, and are thus likely invalid under the FAA. With this ruling, the Ninth Circuit joins the First and Fourth Circuit Courts of Appeals in broadly interpreting the FAA to prevent states from banning mandatory arbitration. However, this may not be the last we see of AB 51 since the injunction preventing enforcement of the law is only temporary. Whether AB 51 will be permanently struck down remains to be seen as the case percolates through federal court. Chamber of Com. of the United States of Am. v. Bonta, No. 20-15291, (9th Cir. Feb. 15, 2023)
There are times employee rights and employer obligations under the FMLA and the ADA overlap. This excerpt from a recent Department of Labor Opinion Letter provides a good explanation of how this might occur:
“Leave provided as an accommodation under the ADA may also be FMLA-protected leave. The FMLA regulations make clear that, in such cases, the employee maintains their rights under both the FMLA and the ADA. Leave provisions of the FMLA are wholly distinct from the reasonable accommodation obligations of employers covered under the ADA. For example, the FMLA leave requirements and the ADA reasonable accommodation requirements may differ with respect to the continuation of an employee’s group health insurance coverage. ‘A reasonable accommodation under the ADA might be accomplished by providing an individual with a disability with a part-time job with no health benefits . . . [h]owever, FMLA would permit an employee to work a reduced leave schedule until the equivalent of 12 workweeks of leave were used, with group health benefits maintained during this period.’ The ADA might require that an employer offer an employee a reasonable accommodation, while the FMLA would entitle an employee to return to work at the same or a virtually identical position as held prior to the FMLA leave period.“ (citations omitted).
Hanft Fride’s business and trial lawyers are located at 1000 U.S. Bank Place, in Duluth, Minnesota. Visit our website at www.hanftlaw.com for general information on the firm and our attorneys. Our employment lawyers include Tom Torgerson, Rob Merritt and Scott Witty. Richard Burns is now of Counsel.
The information provided in this E-letter is general in nature and should not be used as a substitute for professional services and advice. The communication and receipt of this information is not intended to create an attorney-client relationship. Readers should consult with their legal counsel before taking any action on matters covered in this E‑letter.
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