Hiring? Three Points to Consider in Your Employment Agreements

A few years ago, after completing my latest adverse impact analysis in yet another reduction-in-force, I paused to wonder why my usually interesting job as an employment lawyer had become so depressing. A quick count revealed that in the first three months of 2009, I had counseled nervous and often distraught employers through so many reductions-in-force that I had been involved in literally thousands of people losing their jobs. I realized this week that over the past several months, I have drafted, negotiated and/or revised many more employment agreements than severance agreements. I hope this is a sign that the economy is indeed looking up and my time spent running statistics over excel spreadsheets is waning.

The NLRB and the EEOC have also taken some interesting positions of late regarding employment agreement terms. As I explain more fully below, these positions should be taken with varying degrees of concern, but you should be aware of them as you dust off your prior employment agreements and start hiring again. This post addresses three points related to provisions in employment agreements for employers to consider when making new hires.

The first point is a well-settled point of Labor Law that is often overlooked in employment agreements. The National Labor Relations Act, which applies to employers regardless of whether they have a unionized workforce, prohibits employers from requiring employees to keep the terms of their employment, which would include their compensation and benefits, confidential. The NLRA prohibits such restrictions because if employees are not allowed to discuss their compensation, benefits, and working conditions, they will have difficulty determining whether they want to unionize. Often, however, I have reviewed employment agreements that contain confidentiality provisions that require the employee to agree to keep the terms of the agreement confidential. This term would likely be construed as a violation of the National Labor Relations Act by the NLRB. Employers should review the confidentiality provisions in their employment agreements to make certain that their agreements do not require the employee to keep their compensation, benefits, and other terms confidential during their employment.

As you may know, the NLRB’s credibility is at best questionable right now, as the Federal Circuit Courts make differing rulings on the legitimacy of the appointment of some of its members. However, the NLRB has recently taken the above-concern about confidentiality of employment terms to new levels—which leads the second point for your consideration. Late last month, the NLRB held that confidentiality provisions in employment agreements that define protected confidential information to include “personnel information of co-workers” may also be in violation of the NLRA. In Quicken Loans, Inc., 359 NLRB No. 141 (June 21, 2013), the NLRB considered a “Mortgage Broker Employment Agreement” the employer required all mortgage brokers to sign. The Confidentiality provision included in its definition of protected Confidential Information: “all personnel lists, rosters, personal information of co-workers, managers, executives and officers; handbooks, personnel files, personnel information such as home phone numbers, cell phone numbers, addresses and email addresses.” The NLRB found that prohibiting employees from discussing the “personnel information” of co-workers was also in violation of the NLRA. The arguments for protecting co-worker personnel information as part of a confidentiality provision are strong. Employers want to show that they take the protection of their employees’ information seriously and likely have a legitimate business interest in competitors not learning information about their employees, including their employees’ contact information, compensation, and benefits. Employers should weigh the need for confidentiality of their employees’ information with the risk that such a provision would violate the NLRA and consult counsel in determining the best way to craft their confidentiality provisions.

Third, non-disparagement clauses have come under fire by both the NLRB and the EEOC. The NLRB recently held that a non-disparagement clause that prohibited current employees from criticizing the employer was in violation of the NLRA. The EEOC has taken the position in the past that non-disparagement clauses for active employees may be viewed as chilling or prohibiting protected activity pursuant to Title VII. The EEOC, however, has taken its view on non-disparagement clauses a step further. In a recent case, which the EEOC settled out of court, the EEOC took the position that a non-disparagement clause in a severance agreement also could be viewed as prohibiting protected activity, even though it exempted activities related to responding to a subpoena or a governmental investigation. Instead, the EEOC claimed that the non-disparagement clause should make clear that the agreement does not limit the employee’s right or ability to file discrimination charges with the EEOC or its state or local counterparts. The EEOC’s theory, of course, was not tested in court, as the case settled. However, employers should consider this position when drafting their non-disparagement clauses whether in employment agreements or severance agreements. As a result of the concerns regarding non-disparagement clauses for current employees, employers should consider removing any non-disparagement clauses from their employment agreements. They very likely create more risk than they provide practical protection. Employers with non-disparagement clauses in any of their employee-related agreements should seek review by counsel to weigh the risks and benefits in their particular situation and determine whether the clause should be included at all or whether additional language should be added to the clause for clarity.

Finally, a discussion of hiring would not be complete without a friendly reminder that if you are a North Carolina employer with 25 or more employees, as of July 1, 2013, you are required to be using E-Verify for new hires. Employers with 100 or more employees have been using E-Verify since January 1 of this year. If you have any questions about your requirements, seek legal counsel.

Crafting employment agreements, even confidentiality agreements for at-will employees, is trickier than simply drafting a contract. Employment laws enforced by a variety of governmental agencies can be violated unintentionally and a wrongly crafted provision can leave an employer vulnerable. Employers should take a measured approach to changing their agreements or crafting new provisions, considering any legal risk created by the provisions, the business need or protection they address, and the practical effect on the employee and the employer. Even though drafting compliant and effective employment agreements can be difficult, let’s be thankful we are worrying more about hiring than firing this summer!

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