By Stan Hill
Separation and severance agreements are intended to provide finality to the employment relationship. Without careful drafting, however, this goal can be frustrated by the National Labor Relations Act (“Act”), which applies to non-management employees, both union and non-union, including when employees sign separation or severance agreements. In Quicken Loans, Case 28-CA-146517 (Mar. 17, 2016), an Administrate Law Judge of the National Labor Relations Board invalidated three common severance agreement provisions (a confidentiality clause, a company property return clause, and a non-solicitation of employees and customers clause) as over broad and chilling the exercise of rights protected by the Act.
Understanding why these common severance agreement provisions were invalidated can assist with drafting non-management severance agreements to include lawful restrictions protecting business information and assets.
- Confidentiality Clause
The Act permits employers to prohibit current and former employees from misappropriating trade secrets and other legally protected confidential and proprietary information. A confidentiality clause requiring secrecy of documents or information not maintained in secrecy by the employer, or which concern wages, work rules, or other terms and conditions of employment, should not be subject to a post-employment confidentiality clause.
- Company Property Return Clause
Employers have the right to demand that departing employees return computers, phones, and other tangible and intangible property (including documents containing trade secrets and legally protected confidential information) to the employer. Company property subject to return, however, should not include employment handbooks and manuals with generally applicable employment policies, which generally do not qualify as legally protected information.
- Non-solicitation of Employees Clause
Employers should avoid separation agreement language prohibiting solicitation of employees “for any reason,” or for specified reasons that are an unlawful restraint of trade under applicable state law. Under the most recent NLRB administrative rulings, an over broad non-solicitation clause may reasonably chill communications about wages and working conditions, and inhibit NLRB investigations, protected by the Act.
When drafting employee severance and separation agreements, employers should be mindful of the breadth of post-employment restrictions and how they may implicate rights protected under the Act.