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Drafting Severance and Confidentiality Agreements Amid New EEOC and NLRB Scrutiny Navigating Agency Requirements for Non-Disparagement, Employee Behavior and Confidentiality Provisions
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WEDNESDAY, SEPTEMBER 24, 2014
Presenting a live 90-minute webinar with interactive Q&A
Kerry E. Notestine, Shareholder, Littler Mendelson, Houston
Christina A. Stoneburner, Partner, Fox Rothschild, Roseland, N.J.
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FOR LIVE EVENT ONLY
Drafting Severance and Confidentiality Agreements Amid New EEOC and NLRB Scrutiny
Wednesday, September 24, 2014
Presented by:
Kerry E. Notestine Littler, Dallas knotestine@littler.com 713.652.4748
Christina A. Stoneburner Fox Rothschild, Roseland, N.J. cstoneburner@foxrothschild.com 973.994.7551
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Agenda EEOC requirements and
legal framework for severance agreements
NLRB requirements and legal framework – Confidentiality provisions – Employee behavior and
conduct policies – Non-disparagement
provisions Drafting best practices
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Background to Current Issues
This is NOT just about the OWBPA and Age issues
EEOC Enforcement Guidance on non-waivable employee rights under EEOC enforced statutes, EEOC Notice 915.002 (4/10/97)
29 USC § 626(f)(4) codifies this obligation for claims under the ADEA.
EEOC v. Eastman Kodak, 2006 case under Title VII and the ADEA.
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Kodak Consent Decree
“Except as described below, you agree and covenant not to file any suit, charge or complaint against Releasees in any court or administrative agency, with regard to any claim, demand, liability or obligation arising out of your employment with Kodak or separation therefrom. You further represent that no claims, complaints, charges, or other proceedings are pending in any court, administrative agency, commission or other forum relating directing or indirectly to your employment by Kodak. Nothing in this Agreement shall be construed to prohibit you from filing a charge with or participating in any investigation or proceeding conducted by the EEOC or a comparable state or local agency. Notwithstanding the foregoing, you agree to waive your right to recover monetary damages in any charge, complaint, or lawsuit filed by you or by anyone else on your behalf.”
Consent Decree, EEOC v. Eastman Kodak (W.D.N.Y. October 11, 2006).
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EEOC v. Baker & Taylor
EEOC sues Baker & Taylor May 20, 2013 EEOC and Baker & Taylor enter into sweeping
consent decree July 2013 “Employees retain the right to participate in
any action [before the EEOC or comparable state or local agencies] and to recover any appropriate relief.”
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EEOC v. CVS Pharmacy
EEOC sues CVS Pharmacy on February 7, 2014
EEOC alleges “Pattern or Practice” of unlawful conduct
Release agreement attached to Complaint
Covenant not to Sue includes Charge Carve-out
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EEOC v. CVS Pharmacy
Provisions challenged • Covenant not to Sue • Non-Disparagement and Non-
Disclosure • Notification • Remedies including Attorneys’
Fees • Five-Page Single Spaced
Document
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EEOC v. CVS Pharmacy
Motion to Dismiss Filed on 4/18/14 No Unlawful Discrimination No Pattern & Practice EEOC failed to Conciliate
Amicus Curiae Brief by Retail Litigation Center Five Page Release is not
Burdensome Fully Briefed and
Awaiting Decision 14
EEOC v. CollegeAmerica
EEOC Phoenix District Office sues CollegeAmerica in Denver on 4/30/14
Employee (Potts) Resigned Signed Settlement Agreement
$7000 payment and No Dispute on Unempl. Agreement Not to Contact Gov’t Agency Forward Complaints and Non-Disparagement
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EEOC v. CollegeAmerica
Allegedly disparaging emails with another former employee that are forwarded to Company
Potts files Charge Company sues Potts 7 days later Potts files two Retaliation Charges
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EEOC v. CollegeAmerica
Potts and 4 Form Agreements Attached to Complaint
Prohibits Filing Charge/No Carve Out EEOC challenges Additional Provisions
No Claims Certification of Non-Compliance Disclosure Severability Clause
CollegeAmerica filed MTD which is fully briefed and awaiting Decision
MeToo Motion to CVS
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Can a Severance Agreement Waive Claims Under the NLRA?
General Rule is that Severance Agreements should be treated as any other non-Board settlement and Board would defer after examining: ─ Whether the parties have agreed to be bound, and the position
taken by the General Counsel regarding the settlement; ─ Whether the settlement is reasonable in light of the violations
alleged, the risks inherent in litigation, and the stage of litigation; ─ Whether there has been any fraud, coercion, or duress by any
party in reaching the settlement; and ─ Whether the respondent has a history of violations of the Act or
has breached past unfair labor practice settlement agreements (Independent Stave Co., 287 NLRB 740, 743 (1987)
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Can a Severance Agreement Waive Claims Under the NLRA? (cont.)
NLRB may or may not defer to the terms of the severance agreement
Even an employee who signed a severance agreement may later file an unfair labor practice charge or recover money in the event a charge is filed on the employee’s behalf
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Why Has the NLRB Been Actively Reviewing
Severance Agreements?
Memorandum OM 08-13 (December 5, 2007)
Issued to all Regional Directors Calling for them to Actively Investigate Waivers
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Confidentiality and Non-disparagement Provisions: Why Does the NLRB Care?
NLRA Section 7: “Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection . . .”
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Confidentiality and Non-disparagement Provisions: When Did the NLRB Start Caring?
Not a new concept See, for example, Metro Networks, Inc,. and American
Federation of Radio and Television Artists, Philadelphia Locals, AFL-CIO, Cases 4-CA-26812 and 4-CA-27207 (September 28, 2001)
Violation of Section 8(a)(4) where fired employee for union activity and then gave release with unlawful confidentiality provision: ─ Stating employee would not “publish, publicize, disseminate,
communicate or cause to be published, information concerning your employment . . . , the existence of this Agreement or the terms described herein except to your immediate family, attorneys, accountants, or tax advisors.”
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But Why the Sudden Focus?
In part, because this has become an enforcement issue at the federal level with the EEOC
As overall union representation declines (now approximately 8%), NLRB has been more aggressive about enforcing rights to engage in concerted activity in actively reviewing handbooks, social media policies and severance agreements
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Confidentiality and Non-disparagement Provisions: What Does the NLRB Care About?
Broad provisions that prohibits or would reasonably lead an employee to believe that they are prohibited from saying anything about the employer or that restrict right to concerted activity
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Confidentiality and Non-disparagement Provisions: How Much Does the NLRB Care?
Not uncommon for NLRB to include in Notices to Employees where violation is found that the employer “will not require you to sign a severance agreement or any agreement that contains confidentiality or non-disparagement clauses that restrict you from engaging in protected concerted activities ─ See Board Decision in Pratt (Corrugated Logistics),
LLC and Teamsters Local 773, Cases 04-CA-07963, 04-CA-079858, 04-CA-079976, and 04-RC-080108 (February 21, 2014)
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Problems With Severance Agreements in Pratt
Extensive discussion in the ALJ decision (JD-08-13) of problem provisions: ─ Provision that prevented the employee from disclosing
the “contents” of the agreement with anyone except family or financial or legal
─ Provision that prevented the employee from making statements or engaging in conduct that “disparages, criticizes . . . or otherwise cases a negative characterization upon . . . any Pratt Entity . . . nor encourage or assist anyone else to do so.”
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Problems With Severance Agreements in Pratt (Cont.)
Non-disparagement clause was not saved by provision saying that is does not prevent signatory from testifying in a legal proceeding or complying with a subpoena ─ Employees must be able to consult with other
employees and their union on employment matters
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Drafting Best Practices
Don’t overreact ─ EEOC does not seem to be challenging the validity of
the releases themselves ─ BUT: Companies that make themselves a target must
either litigate or make the EEOC their drafting partner on future releases
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What You CANNOT Include
“In exchange for the consideration contained in this Release Agreement, I agree not
to file any claim, action, complaint, charge or other
proceeding against the Company”
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Why Not?
29 U.S.C. §626 (f)(4): “No waiver agreement may affect the Commission’s rights and responsibilities to enforce this chapter. No waiver may be used to justify interfering with the protected right of any employee to file a charge or participate in an investigation or proceeding conducted by the Commission.”
EEOC Enforcement Guidance on non-waivable employee rights under EEOC enforced statutes, EEOC Notice 915.002 (4/10/97).
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What You CANNOT Include
“I agree that if I hereafter bring any action or proceeding of any kind against the Company, the
Company shall have the right to recover from me all sums paid
pursuant to this Release Agreement, in addition to any damages the Company shall
suffer”
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Why Not?
29 U.S.C. §1625.23 (Waivers of Rights and Claims: Tender Back of Consideration); Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998).
However, it is permissible to include a tender-back provision for violation of other provisions of the Release Agreement, including disclosure of confidential information, non-disparagement of Company, non-solicitation, etc.
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What You CANNOT Include
“I agree that I shall not at any time hereafter give testimony
to, or otherwise cooperate with, the EEOC or any
individual bringing a claim against the Company”
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Why Not?
“Agreements that attempt to bar individuals from filing a charge or assisting in a Commission investigation run afoul of the anti-retaliation provisions because they impose a penalty upon those who are entitled to engage in protected activity under one or more of the statutes enforced by the Commission.” ─ EEOC Enforcement Guidance on non-waivable employee
rights under EEOC enforced statutes, EEOC Notice 915.002 (4/10/97).
─ EEOC v. Astra USA, Inc., 94 F. 3d 738 (1st Cir. 1996).
36
What You CANNOT Include
“I agree that in order to receive the payment set forth in this
Release Agreement, I must first withdraw the charge I previously filed with the EEOC, Charge No.
XXXXXX”
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Why Not?
To require a person to withdraw her EEOC charge as a condition of receiving severance pay violates the anti-retaliation provisions contained in the ADEA (29 U.S.C. §623(d)) and Title VII (42 U.S.C. §2000e-3(a). ─ EEOC V. Lockheed Martin Corp., 444 F. Supp. 2d 414
(D.C. MD 8/8/06).
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Drafting Best Practices
Continue to include release of claims for individual relief in agency proceedings
Continue to require representation of whether a charge is pending
Continue to require agreement not to reapply Consider requiring employee disclosure of
known company non-compliance with regulatory obligations 39
Drafting Best Practices
For pending charge, weigh risks of requiring employee to request withdraw charge and right to sue
For pending charge, consider having employee advise EEOC of settlement and employee’s satisfaction therewith, with no explicit request for file closure
For pending charge: ─ Do not make actual withdrawal of charge a condition precedent to
payment ─ Consider making EEOC approval of settlement a condition of
having a settlement (generally not advised) ─ Unless seeking EEOC approval as a condition of the settlement,
do not make actual closure of charge a condition precedent to payment
40
Drafting Best Practices
Include carve out of agency charges (regardless of other release terms) ─ Cover all governmental complaints (EEOC, NLRB,
state agencies, others) ─ Consider using a separate, highlighted paragraph
(omnibus carve out) ─ Consider referring to the carve out in each section that
might restrict assistance to an agency, e.g., confidentiality and nondisparagement
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Sample Agency Charge Carve Out
Nothing in this Agreement including but not limited to the release of claims, proprietary information, confidentiality, cooperation, and non-disparagement provisions, prevents Employee from filing a charge or complaint with or from participating in an investigation or proceeding conducted by the EEOC, NLRB, or any other federal, state or local agency charged with the enforcement of any laws, although by signing this release Employee is waiving rights to individual relief based on claims asserted in such a charge or complaint, except where such a waiver of individual relief is prohibited.
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Drafting Best Practices
Consider foregoing the covenant not to sue Revise or eliminate troublesome terms
─ Noncooperation with agency ─ Cooperation with employer ─ Confidentiality ─ Nondisparagement ─ Claims for breach by employee (prevailing party
attorney fees, etc.)
43
Drafting Best Practices
CVS: “Among other things, the five-page single spaced Separation Agreement states . . ..” (emphasis in original).
The lesson: ─ Simplify ─ Simplify ─ Simplify ─ Simplify ─ Simplify
44
Drafting Best Practices
Give employees sufficient time to review the Agreement ─ Decisions applying the Independent Stave analysis
have upheld waivers of claims where employees had 45 days to review to the Agreement
• See BP Amoco Chemical – Chocolate Bayou, 351 NLRB No. 39 (September 29, 2007)
• Hughes Christensen Co., 317 NLRB 633 (1995)
46
Drafting Best Practices
Set forth in the Agreement that the employee has the right to consult with an attorney
Consider also adding “union representative” Be careful that other provisions of the
Agreement may not be read to restrict concerted activity such as: ─ Statements that no further legal action will be filed ─ Non-cooperation and/or non-solicitation clauses
47
Drafting Best Practices
Add a Section 7 savings clause that nothing in the Agreement is intended to interfere with an employee’s Section 7 rights
48
Drafting Best Practices
Confidentiality provisions should be narrowly drafted. ─ Generally the money is really what an employer wants to
keep confidential. • Confidentiality provision can lawfully provide that
employee cannot disclose the amount paid except to family, tax or legal advisors
─ Be careful about including broad provisions that forbid an employee from discussing his or her employment
─ If there are specific things that you require to be confidential such as trade secrets and proprietary business information, provide specific examples of what those terms mean
49
Drafting Best Practices
Non-disparagement clauses should not just say that an employee may not say “anything negative” ─ Consider saying that the employee can not “defame”
the employer or any released party ─ Can still prevent the employee from “disparaging”
customers, suppliers, or vendors
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