Non-Disparagement Clauses in Cross-Hairs of NLRB – Lessons for Employers & their Employment Lawyers - Part One

Non-Disparagement Clauses in Cross-Hairs of NLRB – Lessons for Employers & their Employment Lawyers

Posted on 11/25/2019 at 03:42 PM by Russell Samson

This is an instructive tale of the Stange Law Firm, P.C. and its disputes with employees, with lessons regarding both non-disparagement provisions in employment agreements and how to view internet postings which are critical of employment and an employer.

The Stange Law Firm, with offices in Missouri, Kansas, Illinois and Oklahoma, focuses only on divorce and family law matters. The law firm requires each newly-hired attorney and support staff member to sign employment agreements which includes a non-disparagement provision. The contract signed by attorneys states:

[D]uring and after Employee’s employment or association with Law Firm ends, for any reason, Employee will not in any way criticize, ridicule, disparage, libel, or slander Law Firm, its owners, its partners, or any Law Firm employees, either orally or in writing. However, nothing in this Section 3.2 shall be deemed to limit or prohibit Employee from engaging in concerted group activity and communications with co-employees to try to improve his or her working conditions, as provided under Section 7 of the National Labor Relations Act.

The contract for the support staff is “nearly identical in relevant portions.” Following the posting of a number of negative and critical reviews regarding employment at the firm on various websites, (e.g., Glassdoor.com, Indeed.com, Avvo, Yelp, and Yahoo.business), the Stange Law Firm filed suit in Missouri state court against one named individual and 10 unnamed individuals, pleading that they had breached the non-disparagement provisions.

An individual (not identified in publicly available materials) filed an unfair labor practice charge against the Stange Law Firm on September 12, 2018, per the docket on the National Labor Relations Board’s website. The Regional Office where the ULP was filed sought advice from the Office of General Counsel of the NLRB on three questions. On November 13, 2019, the NLRB Office of General Counsel publicly released the Advice Memorandum that had been internally issued on March 4, 2019, addressing the three questions.  Again, according to the NLRB docket, the matter was informally settled and the proceeding closed on October 25, 2019.

NON-DISPARAGEMENT CLAUSE GENERALLY

In the Advice Memo addressing the three questions raised in the Stange ULP, the Office of General Counsel – the prosecutorial arm of the NLRB – applied the standards for evaluating facially neutral work rules or policies announced by the Board in The Boeing Co., 365 NLRB No. 154 (2017). It also relied on its own Guidance on Handbook Rules Post-Boeing found in the June 6, 2016, General Counsel Memo 18-04, in which it was announced that employer rules regarding disparagement or criticism of the employer would automatically fall into Category 2. That designation requires an examination of whether the particular rule or policy in question, when reasonably interpreted, prohibits or interferes with the exercise of Section 7 rights. If the answer is yes, there is a consideration of whether any adverse impact on protected conduct is outweighed by legitimate business justifications.

The requirement in the Stange employment contract that the employee not “criticize, ridicule, [or] disparage” the law firm was determined to be “reasonably interpreted” to prohibit or interfere with core Section 7 activity because concerted criticism of a company’s employment and compensation practices is central to rights guaranteed by the National Labor Relations Act. Any restriction on “voicing complaints about the Company,” without any additional context, would likely cause employees to refrain from this kind of protected concerted activity, and from the kinds of discussions that are often the seed for protected concerted activity.

The Stange Law Firm’s reason for the clause was that it relies on its online reputation to advertise for clients, and negative reviews could hurt its business prospects. The Advice Memorandum did not consider that as a business justification sufficient to overcome the adverse impact on protected conduct. 

The Advice Memorandum noted that the Stange Law Firm’s non-disparagement provision was not limited to prohibiting criticism of other employees or to prohibiting disparaging the law firm’s products or services. If the clause had either of those restrictions, then based on the language of the June 6, 2016, General Counsel Memo 18-04 on social media postings, it may have been found to be protected (depending on the language used). But absent those considerations, this non-disparagement clause was determined to be an illegal Category 2 rule under Boeing.

“SAVINGS CLAUSE” NOT EFFECTIVE

The Advice Memorandum expressed the standard that for a “savings clause” to cure a workplace rule that otherwise would have an unlawful impact on Section 7 rights, the clause must do more than generally refer to the Act, or to Section 7 rights. Rather such a clause must both:

  1. Address “the broad panoply of rights protected by Section 7,” and
  2. Be prominent and proximate to the rule that it purports to inform.

While this baseline is based in part on generally consistent Board decisional law going back at least 25 years, be mindful that standard is from the NLRB’s prosecutor directing Regional Directors on how to evaluate cases, and it is not a test from the Board itself.

The decision cited in support of the “prominent and proximate” requirement, First Transit, Inc. involved a 73-page employee handbook, where the alleged savings clause began on page 20 and the challenged personal conduct rules began on page 33, and “[t]he policy does not expressly reference those rules, and the rules do not expressly reference the policy.” While the Advice Memorandum in Stange did not discuss the “prominent and proximate” standard, the “savings clause” was included in the challenged clause – and indeed, by eyeball, took up roughly half of the language in the clause. It was clearly proximate; was it prominent?

With regard to the requirement that the clause address the “broad panoply of rights,” the Advice Memorandum noted that while the Stange Law Firm clause did include “a plain language explanation of Section 7 activities that a reasonable employee would understand” – i.e., “concerted group activity and communications with co-employees to try to improve his or her working conditions” – that plain language did not include the “full panoply” of rights. Specifically identified as not included was communications with third parties, like unions. “Therefore a reasonable employee would still understand the [Law Firm’s] non-disparagement as prohibiting him or her from going to a union and saying anything negative about the [Law Firm].”

While under Boeing, rules and policies are to be viewed through an “objectively reasonable employee,” as the Advice Memorandum in CVS Health (released August 15, 2019) says, “employees, who are laypersons, do not necessarily know the full panoply of their rights under the NLRA.” 

If you are considering including a “non-disparagement” clause in an employment agreement, what kinds of activities do you want to prohibit? Do those activities include anything that might fall within the full panoply of rights protected by Section 7 of the NLRA? Can you realistically draft a savings clause that meets the standard of addressing the broad panoply of rights protected by Section 7?

IRONY – THE POSTS THEMSELVES ARE NOT PROTECTED

Section 7 of the NLRA protects, among other things, the right of employees (a term which, under the law, includes both applicants and former employees) to “engage in other concerted activities for the purpose of . . . other mutual aid or protection." The Advice Memorandum noted that for employee conduct to be protected under Section 7 it must be both “concerted” and undertaken for the purpose or objective of “mutual aid or protection.” 

In looking at the posts which prompted the suit by Stange Law Firm, P.C. against the individuals, the Advice Memorandum concluded that the posts were neither “concerted” nor “for mutual aid or protection.” 

For activity to be “concerted,” it must be either engaged in with, or on the authority of, other employees, or there must be some invitation for group action. The Advice Memorandum concluded that the posts here were more akin to individual gripes. It was noted that while anonymous, the individuals making the posts had all identified themselves as former employees; the Advice Memorandum continued that it appeared clear that the submitters, “have no intent to return to work for the Employer.”  

The Advice Memorandum also concluded that the posts appeared to include no attempt to change the terms and conditions of employment of the law firm’s employees. Rather, the anonymous submitters were trying to warn potential applicants to stay away from the law firm. Thus, the “mutual aid or protection” prong was not met either.

“To the extent the former employees were seeking to hurt the Employer economically, or put it out of business, those goals are also not protected.”

Because the posts were not protected by Section 7 of the Act, if Stange Law Firm, P.C. had taken action against the employees who made the posts – like fire them – that would not violate Section 8(a)(1) of the Act.

But that is not what happened here. Here, Stange Law Firm, P.C. instituted state court litigation based upon violation of contract. The state court action will be discussed in a second blog post.

 

Questions, Contact us today.

 


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