Your Previously Used Employment Forms Need Attention!

On February 21, 2023, the National Labor Relations Board (“NLRB”) issued a decision turning the issue of severance agreements with employees on its head. I am not being dramatic; this was big news for the employment law world for two reasons: First, keep in mind that the NLRB is the body that enforces the National Labor Relations Act (“NLRA” or “the Act”). Second, contrary to public option, the NLRA and, therefore, the NLRB decisions also apply, in many instances, to non-unionized workforces.

The McLaren Macomb decision held that employers violate the NLRA when they offer employees severance agreements that require employees to broadly waive their rights under the Act. By doing so, the NLRB overturned decades of prior precedent to hold that non-disparagement and confidentiality provisions commonly used in severance agreements are broadly unlawful when imposed on employees (as opposed to managers or supervisors.

In addition to obtaining a release of claims, maintaining confidentiality, and obtaining an agreement not to disparage are the main reasons that employers enter into most severance agreements. Employers do not want the terms of a severance agreement broadcasted and also don’t wish to be disparaged by the departing employee.

The McLaren Macomb case involved a hospital in Michigan that permanently furloughed eleven union employees and offered each of them a severance agreement. Each agreement at issue in the McLaren decision contained the following provisions:

• Confidentiality Agreement:“The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouses, or as necessary to professional advisors for purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.”
• Non-Disparagement:“At all times hereafter, the Employee agrees not to make statements to Employer’s employees or the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents, and representatives.”

Historically speaking, these are incredibly common terms to be included in a severance agreement with an employee; Not any longer according to the NLRB. The decision specifically highlighted two things: First, the NLRB noted that the confidentiality provision broadly prohibited employees from disclosing any information regarding the terms of the severance agreement. Thus, the NLRB reasoned that such a provision could prevent an employee from discussing the terms of the severance agreement with co-workers and it could “reasonably tend to coerce the employee from filing an unfair labor practice charge or assisting [an NLRB] investigation into the [employer’s] use of the severance agreement.” Accordingly, the NLRB determined that the inclusion of this provision constituted an unfair labor practice and violated federal labor law. Second, the NLRB held “[p]ublic statements by employees about the workplace that are central to the exercise of employee rights under the [NLRA]” and, therefore, the non-disparagement provision violated an employee’s rights under Section 7 of the Act because it prevented employees from making statements that the employer engaged in unfair labor practices and could potentially discourage an employee from cooperating with an NLRB investigation. Moreover, the NLRB found the provisions to be so onerous and the penalties so severe, that merely proposing a severance agreement containing those terms violates the NLRA, regardless of whether the employee accepts the agreement or not;  Pretty harsh!.

Understandably so, this decision has caused a major shake-up amongst employment attorneys. Realizing the ripple effects of the decision, on March 22, 2023, the NLRB issued detailed guidance for employers. Here are the takeaways that employers should be aware of:

Retroactive

• McLaren has “retroactive application” in that it applies to severance agreements signed before February 21, 2023. In addition, the six-month statute of limitations to bring an unfair labor practice charge relating to an overly broad severance agreement would be construed as a continuing violation by virtue of the employer’s maintaining and/or enforcing a previously-entered severance agreement containing unlawful provisions.

Supervisors

• Supervisors are not protected under the NLRA. Therefore, agreements with supervisory employees may contain these provisions.
• The term “supervisor” means any individual having authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibly to direct them, or to adjust their grievances, or effectively to recommend such action, if in connection with the foregoing

the exercise of such authority is not of a merely routine or clerical nature, but requires the use of independent judgment.

Severability

• Generally, the voidability of a severance agreement with overly broad provisions would be decided on a case-by-case basis. However, the NLRB’s Regional offices generally make decisions based solely on the unlawful provisions and would seek to have those voided out as opposed to the entire agreement.

Employee Request

• These employee protections under the NLRA cannot be waived even if the employee knowingly requests or consents to an overly broad confidentiality or non-disparagement provision.

Confidentiality

• Confidentiality agreements may still be lawful, so long as they are narrowly-tailored to restrict dissemination of proprietary or trade secret information for a period of time based on legitimate business justification.

Non-Disparagement

• Non-disparagement agreements may still be lawful so long as they are narrowly-tailored and limited to employee statements about the employer that meet the definition of defamation as being maliciously untrue, such that they are made “with knowledge of their falsity or with reckless disregard for their truth or falsity.”

The bottom line is that recycling severance agreements that have been attorney-approved in the past is no longer a good practice and could result in potential legal liability on behalf of the employer which could lead to voided out agreements.

-Rachel E. Bossard, a partner at Burke, Warren, MacKay & Serritella, P.C., chairs the Firm’s Labor and Employment law practice group. She represents employers in all aspects of the law including client counseling, training, litigation and benefits. She can be reached at 312-840-7029 or rbossard@burkelaw.com

Dispute Resolution: Set the Rules When Contracting To Save Money and Time

Good fences make good neighbors. Clear, concise contracts make good business relationships. And, good dispute resolution provisions can make resolving future disputes quicker, cheaper, and even preventable.

Generally, disputes in the United States take one or more of three tracks after negotiation fails: mediation, arbitration, and litigation.

• Mediation adds a third party neutral, often a retired judge, to shepherd negotiations. It can resolve disputes before a business relationship becomes
• Arbitration involves a third party decisionmaker, who is paid to hear each side’s case and This is usually a lawyer, and the arbitration process places limits on discovery and procedure that results in a quicker and less expensive dispute resolution process. In exchange, the parties surrender certain due process and discovery rights.
• Litigation is the court process, either before a judge or a

Additionally, a toolbox of contract provisions can help fend off and reduce the cost of future disputes, such as:

• Attorneys’ fee shifting provisions where the losing party pays the attorneys’ fees of the winning party;
• Venue and jurisdiction provisions to require that lawsuits can only be brought in certain courts to prevent being sued in a distant or unexpected place; and
• Waiving the right to a jury trial so that complex business relationships remain with judges, often business court or federal judges, who have experience resolving complex, and often esoteric, business disputes.

These rules should be set at the time of contracting – when the parties are agreeable – and not left to the time their relationship deteriorates when the parties may be inclined to take advantage of the litigation process (and gaps in their previously agreed dispute resolution process). Working with counsel, businesses should consider, among other things:

• Is any confidential information being shared? If so, the sharing party may wish to retain the right to quickly file a lawsuit to put a stop to any improper use if the information is sensitive.
• Is there a prior relationship or is the other business well-established and respected? If so, agreeing to first mediate any dispute may reduce costs and save the relationship in the case of a future issue.
• Is the contract particularly complex or does it involve technical details? Arbitration before an arbitrator who is well-versed in the industry may be ideal, or, at the least, ensuring that the right to a jury trial is waived can keep any future dispute from spinning out of control before a jury of laypeople.
• Are trade secrets involved? Arbitration may be ideal to avoid such details being discussed in open court or in public filings.

Further, considering the interplay of the above tracks and tools can pay dividends. For example, in smaller disputes, businesses are often forced settle litigation given outsized attorneys’ fees for the amount in controversy. But, if the parties had agreed to mediate or arbitrate claims under a certain amount (i.e., $50,000 or $75,000), then the party in the right can short circuit expensive and time-consuming litigation and need not unjustifiably compromise to avoid paying the cost of litigation, including an expensive jury trial. Or, the parties may elect to progressively apply mediation before arbitration or litigation to increase the chances that parties can resolve issues before their relationship (and ability to make money together) becomes irreparably damaged.

If you haven’t considered these options, it may be time to dust off your old contracts and consider updating them. Burke, Warren attorneys have experience drafting such provisions with the insight that comes from extensive litigation, arbitration, and mediation experience. Contact Rachel Bossard at rbossard@burkelaw.com or (312) 840-7029 or Josh Cauhorn at jcauhorn@burkelaw.com or (312) 840-7055 for assistance in evaluating or drafting ideal dispute resolution provisions in your business’ contracts.

Strategic Partners Spotlight

This month were celebrating Cray, Kaiser LTD. & Burke, Warren, Mackay & Serritella

The Importance of Having Critical Conversations with Employees Regarding Workplace Performance

No one enjoys engaging in difficult conversations with employees regarding workplace performance. However, putting it off or avoiding it altogether can have serious ramifications and even lead to legal liability. Too often, clients come to me with a desire to make a termination decision when they have failed to properly set the stage. When clients inquire about the potential for discharging an employee, I always ask whether the employee has been placed on notice of the performance issues. Were there any warnings issued or any progressive discipline? What does the last performance evaluation show? In many instances, the answer I receive is that there is no documentation to support such a decision. 

Illinois is an at-will employment state, meaning that an employee can be discharged for any reason or no reason, as long as it is not against the law. In my experience, when an employee is discharged with no notice of performance problems, the employee frequently jumps to the conclusion that reason must be an unlawful one. The universe of protected classes under the law that gives employees a basis to claim discrimination continues to expand. In addition, there are a number of attorneys willing to take disgruntled former employee cases when the personnel file contains no evidence to support the termination decision. This can be avoided if employers stay ahead of the game and think about what the personnel file of a discharged employee should look like. This is just one of the reasons that engaging in critical conversations with employees and documenting those conversations is so important.  

Failing to have those critical conversations about workplace performance can also send a damaging message to other employees. When one employee is allowed to arrive to work late or their performance is not up to par, it can cause morale problems. If an employee is allowed to behave badly, it can be perceived as bullying or even unlawful harassment, which can lead to liability.  Imagine a situation where an employee is allowed to violate the dress code or has poor hygiene, causing other employees to gossip about it. By avoiding these uncomfortable conversations with employees, the issue can morph into an even bigger problem. For these reasons, and many others, it is important for employers to face these situations. The following are some tips for preparing and engaging in these difficult situations.   

Prepare 

Preparation is key. The more prepared you are, the less uncomfortable you are likely to feel. Prior to meeting with the employee, make sure that you have outlined the workplace performance issues and any policies that are applicable to the situation. Be specific. Generalized negative feedback is not very helpful. Draft bullet points of the matters that need to be discussed in the meeting. Set clear expectations of what the next steps are. It can never hurt to practice what you plan to say, especially if you are dealing with a sensitive topic or sensitive employee.  

Be Positive 

No one likes to be told that they are not doing a good job. These meetings can be very emotional. If you act like this is the end of the world, your employee will feel like it is as well. Think of the meeting as a coaching and counseling session, not a doomsday experience. It often helps to also provide positive feedback on areas where the employee is succeeding. The employee should leave the meeting empowered with the knowledge of what it takes to succeed and feeling as though they have the ability to do so.  

Listen Actively 

After you explain to the employee the issues that need to be addressed, make sure to take great care to listen. Remember, it is your job to help the employee succeed. There could be a reason for the performance issues that may need to be addressed. The employee may be the subject of harassment from another employee or customer or client, or the employee could be experiencing a medical or family issue that requires time off or a reasonable accommodation. Each of these issues can have serious legal implications if not properly addressed.  

Consistency is Key 

All employees should be held to the same performance standards and employment policies. When one employee falls behind or fails to abide by the rules, it is necessary to intervene for the sake of all employees. This is true whether the issue is attendance, performance, or failing to dress professionally. Allowing one employee to fail can have the effect of bringing down the entire team and can also lead to claims of discrimination. 

Have a Witness 

You should never make the mistake of having a critical conversation with an employee one on one. While these meeting are confidential and can be emotional, it is important that there is a witness to what was discussed. That witness will be very important if the matter ever leads to a legal claim. The witness can also be helpful in keeping emotions in check. Employees may react more rationally and stay more composed if there is a third person in the room. 

Document, Document, Document 

In serious situations, a written or final warning should be presented to the employee and the employee should be asked to sign acknowledging that the employee has been advised of the deficiencies and that failure to improve will lead to termination of employment. However, not every critical conversation warrants that type of documentation. Early counseling sessions can be just as critical, but do not require the same documentation. Rather, you can simply type up a memorandum summarizing what was discussed and place it in the employee’s personnel file. That document will be very important if the performance does not improve and the conversations escalate.   

Follow Up 

Make sure to set a time to meet with the employee again, whether it is to advise them that you have witnessed improvement and the employee is on the right track or to advise them that additional improvement is needed. Giving positive feedback keeps the lines of communication open, is good for the company culture, and may in fact help the employee to succeed. If additional improvement is needed, continue to follow these steps. By doing so, you will be placing the employee on notice that their job may be in jeopardy and you will be generating the necessary evidence to support further action, including a termination decision. 

Having critical conversations with employees regarding workplace performance is never easy. However, if you follow these steps and are prepared and consistent, you will find the conversations to be less difficult and your efforts will serve to better protect the company from legal liability.  

Rachel E. Bossard, a partner at Burke, Warren, MacKay & Serritella, P.C., chairs the Firm’s Labor and Employment law practice group. She represents employers in all aspects of the law including client counseling, training, litigation and benefits. She can be reached at 312-840-7029 or rbossard@burkelaw.com