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

Part One of this post discussed an NRLB Office of General Counsel Advice Memorandum which determined that a provision in employment agreements used by The Stange Law Firm, P.C. unlawfully interfered with or restrained employees in their exercise of rights protected by Section 7 of the National Labor Relations Act, 29 U.S. Code § 157. The clause in question provided:

[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 Advice Memorandum concluded that merely having the policy or practice in place was a violation of Section 8(a)(1) of the Act, 29 U.S.C. § 158(a)(1).

As of the date this is written, the underlying unfair labor practice charge is not publicly available on the Board’s website. From the facts outlined in the Advice Memorandum, one infers that the charge was filed in response to litigation the Stange Law Firm started against former employees in state court – litigation in which the law firm pleaded that the individuals had breached the non-disparagement provisions of their employment agreements. A snide aside: as fewer and fewer law schools are offering a fundamental course in labor law, I tip my hat to the attorney who recognized -- in a state court employment contract dispute -- the potential NLRA claims. The professors at GULC were right: the law is a seamless web.

My law school’s web site indicates that “Labor Law” is still being offered. If faculty member Michael Gottesman is teaching that course, I’d be tempted to take it again. I have no doubt that he would be teaching students that under federal labor law, there are three theories where the mere maintenance by an employer of a civil lawsuit will violate Section 8(a)(1) of the Act:

1. The lawsuit lacks a reasonable basis in law or fact and was commenced with the motive of retaliating against the exercise of Section 7 rights.;
2. The lawsuit has an “illegal objective” under the National Labor Relations Act.; or
3. The lawsuit is preempted by the National Labor Relations Act.

The Advice Memorandum noted that the “disparaging” comments about working at the law firm which had been posted on various internet websites did not constitute protected, concerted activity under the Act. A claim that the litigation was undertaken in retaliation for having exercised Section 7 rights is effectively foreclosed by a determination that one was not engaged in the exercise of Section 7 rights in the first instance.

In a similar vein, while the General Counsel, as prosecutor, will argue that maintenance of the non-disparagement clause is unlawful, the Board itself had not made such a determination. Given that, a lawsuit to enforce the clause does not yet have an “illegal objective.” 

Which leaves the question of whether the underlying state court litigation is preempted by the National Labor Relations Act.

Persons who either practice federal labor law or who have taken a law school course on the subject within the last sixty years are familiar with “Garmon preemption” as explained in the Supreme Court’s decision in San Diego Building Trades Council v. Garmon. The keystone of that concept is the integrated scheme of interpretation and enforcement established by the National Labor Relations Act: the NLRB has and must exercise its primary jurisdiction to determine in the first instance whether activity is protected or prohibited by Section 7 and Section 8 of the Act. “Garmon preemption” is intended to prevent state or local interference with the NRLB’s jurisdiction and assures uniformity of federal law across  the country -- by essentially divesting states of jurisdiction.

In 1991, in Loehmann’s Plaza [1], the Board answered a question left open by the Supreme Court in International Longshoremen v. Davis: in a Garmon preemption situation, when can one say with certitude there is pre-emption. In Loehmann’s Plaza [1], the Board stated, “we find that when the General Counsel issued a complaint alleging that the Respondents’ lawsuit constituted unlawful interference with protected activity, the requirements for establishing preemption were met.”  

The Advice Memorandum in Stange Law Firm noted that the continued prosecution of the state court breach of contract allegations in the face of the General Counsel issuing a complaint would be preempted under Garmon --  and indeed may result in a separate complaint alleging a separate violation of Section 8(a)(1) of the Act. The Advice Memorandum instructed that immediately upon the issuance of the complaint alleging the maintenance of the nondiscrimination clause violates the Act, the Region should inform the law firm that the law firm had seven days to either seek to dismiss or seek to stay (pending final resolution of the Board complaint / action) so much of the state court litigation as seeks to enforce the non-disparagement contract clause which is alleged to violate the Act on its face. The Advice Memorandum instructed the Region that if the Stange firm failed to take the stay/dismiss action as directed, an amended complaint should issue – asserting an additional violation of Section 8(a)(1) by maintaining a preempted lawsuit.

While not mentioned in the Advice Memorandum, for readers who have not had the benefit of either a law school course in federal labor law or who do not practice in that area of the law, Section 10(j) of the Act empowers the General Counsel, after issuance of a complaint, to seek “appropriate temporary relief or restraining order” from a United States District Court. The same statute provides that upon the filing of a petition seeking that relief, “the court . . . shall have jurisdiction to grant the Board such temporary relief . . as it deems just and proper.”

Employers and their counsel may wish to review the language and usage of non-disparagement clauses. Attorneys who represent “employees” may wish to review the provisions of the National Labor Relations Act.