The audio portion of the conference may be accessed via the telephone or by using your computer's
speakers. Please refer to the instructions emailed to registrants for additional information. If you
have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.
Drafting Severance and Confidentiality
Agreements Amid New EEOC, NLRB,
and Now SEC Scrutiny Anticipating and Avoiding Agency Challenges to Non-Disparagement, Cooperation,
Confidentiality, No Rehire, Covenants Not to Sue, and other Common Provisions
Today’s faculty features:
1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific
WEDNESDAY, SEPTEMBER 9, 2015
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.
Tips for Optimal Quality
Sound Quality
If you are listening via your computer speakers, please note that the quality
of your sound will vary depending on the speed and quality of your internet
connection.
If the sound quality is not satisfactory, you may listen via the phone: dial
1-866-370-2805 and enter your PIN when prompted. Otherwise, please
send us a chat or e-mail [email protected] immediately so we can address
the problem.
If you dialed in and have any difficulties during the call, press *0 for assistance.
Viewing Quality
To maximize your screen, press the F11 key on your keyboard. To exit full screen,
press the F11 key again.
FOR LIVE EVENT ONLY
Continuing Education Credits
In order for us to process your continuing education credit, you must confirm your
participation in this webinar by completing and submitting the Attendance
Affirmation/Evaluation after the webinar.
A link to the Attendance Affirmation/Evaluation will be in the thank you email
that you will receive immediately following the program.
For additional information about CLE credit processing call us at 1-800-926-7926
ext. 35.
FOR LIVE EVENT ONLY
Drafting Severance and
Confidentiality Agreements
Amid New EEOC and NLRB
Scrutiny
Wednesday, September 9, 2015
Presented by:
Kerry E. Notestine
Littler, Houston
713.652.4748
Christina A. Stoneburner
Fox Rothschild, Roseland, N.J.
973.994.7551
5
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
6
EEOC Requirements and Legal
Framework for Severance Agreements Kerry Notestine, Littler
A
7
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.
8
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). 9
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.”
10
CVS and CollegeAmerica Cases
11
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 12
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
13
EEOC v. CVS Pharmacy
Motion to Dismiss
No Unlawful Discrimination
No Pattern & Practice
EEOC failed to Conciliate
Court Dismisses Case
based on Conciliation
Issue
Currently on Appeal.
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
15
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
16
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 on Same theories as CVS
Court Dismisses Interference
Claim based on Failure to
Conciliate
Retaliation Claims Remain
17
SEC v. KBR
KBR used a Confidentiality Statement For
Internal Investigations Covered by Attorney
Work Product Privilege
Required Confidentiality Unless Law
Department Agrees to Disclosure
No evidence that the Agreement Prevented
Anyone From Contacting the SEC
SEC Claims Statement Violated SEC Rule 21F-
17 which prevents interference with SEC
investigations
18
SEC v. KBR
KBR Agrees Amend Agreement to Carve Out
Right to Complain to SEC and Participate in
SEC Investigations
Employees not required Law Department
Approval to make reports or participate in
investigations
$130,000 Civil Penalty
19
NLRB Requirements and Legal
Framework Christina A. Stoneburner, Fox Rothschild
A
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)
21
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
22
Cannot Be an “End Around” the Union
Hotel Bel-Air and Unite Here Local 11, Case
31-CA-029841 (September 27, 2012)
─ NLRB invalidated severance agreements that were
directly negotiated with employees
• Terminations and severance pay were subject to
negotiations with Union
• Company claimed they were at impasse so sent
severance letters directly to employees
• Board held not at impasse and thus company was
prohibited from dealing directly with employees
23
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
24
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 . . .”
25
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.”
26
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
27
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
28
General Counsel Guidance Memo
Memorandum GC 15-04, March 18, 2015
─ Although not focused on severance agreements,
provides guidance on complaints of broad
confidentiality provisions.
─ Unlawful:
• Do not discuss “customer or employee information”
• Never publish or disclose employer’s or another’s
confidential information
─ Lawful:
• No disclosure of “business secrets”
29
Guidance Memo (cont.)
Lawful Confidentiality Provisions:
• No disclosure of “business secrets”
• Do not disclose confidential financial data or other
non-public proprietary company information
30
Guidance Memo Re: Non-Disparagement
Clauses
Unlawful
─ Prohibitions on saying anything negative, disrespectful
or rude
─ False statements
─ Do “not make fun of, denigrate, or defame your co-
workers, customers, franchisees, suppliers the
Company or our competitors”
─ Refrain from causing damage to the Company’s
business or reputation.
31
Guidance Memo: Non-Disparagement
Clauses – What Can You Say?
Lawful
─ Must be respectful to coworkers, clients or competitors
(but not employer or management)
─ No “rudeness or unprofessional behavior toward a
customer, or anyone in contact with the Company”
─ “Being insubordinate, threatening, intimidating,
disrespectful or assaulting a manager/supervisor,
coworker, customer or vendor will result in discipline
32
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)
33
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.”
34
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
35
Drafting Best Practices Kerry Notestine, Littler
Christina A. Stoneburner, Fox Rothschild
A
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
37
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”
38
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).
39
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”
40
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.
41
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”
42
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).
43
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”
44
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).
45
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
46
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
47
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
48
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.
49
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.)
50
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
51
Resources
March 4, 2014 ASAP
on CVS
May 13, 2014 ASAP on
CollegeAmerica
52
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)
53
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
54
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
55
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
56
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
57
Top Related