NLRB modifies tough stance on at-will clauses

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After stirring up the bar with a pair of cases alleging that at-will employment clauses for non-union workers violated federal law by potentially stifling concerted activity, the National Labor Relations Board has issued guidance memos that offer some relief for employment-side attorneys.

The memos outline two cases in which the language of at-will employment clauses was found not to violate the National Labor Relations Act. The decisions should help ease the concerns of lawyers who earlier this year feared an NLRB crackdown on what has become standard language in employment agreements.

“This was a new issue, a totally new source of concern,” said Scott Faust, a partner at Proskauer Rose in Boston. “No one would have considered at-will employment agreements to be considered a potential unfair labor practice less than a year ago. …The good news is that [the NLRB] seems to be taking a step back.”

The newly issued memos eliminate the need for many employers to re-write at-will clauses in employment handbooks, a move that would have been time consuming and costly.

“I think many people are breathing a sigh of relief,” said Lisa Stephanian Burton, who focuses on labor and employment issues as a partner in the Boston office of Morgan Lewis.

Guidance offered

Last summer, two NLRB cases put employers and their attorneys on high alert.

In the first case, an at-will employment clause required employees to “agree that the at-will employment relationship cannot be amended, modified or altered in any way.”

In the second, the at-will clause read in part: “I understand my employment is ‘at will.’ … I acknowledge that no oral or written statements or representations regarding my employment can alter my at-will status.”

The NLRB took the view in both cases that the clauses’ language violated Section 7 of the National Labor Relations Act by chilling the ability of employees to communicate with each other about their wages, hours and working conditions or engage in other kinds of protected concerted activity.

Although neither case has precedential value — one only went as far as a hearing before an administrative law judge and the other ended in settlement — they spurred employers and their attorneys to start carefully scrutinizing the language in their employment handbooks for fear that it could lead to NLRB scrutiny.

Apparently aware of the concern the rulings had caused in the employment law bar, NLRB counsel recently issued a pair of guidance memoranda.

One memo, involving California freight company Rocha Transportation, considered an at-will clause that read in part: “Employment with Rocha Transportation is employment at-will. … No manager, supervisor, or employee of Rocha Transportation has any authority to enter into an agreement for employment for any specified period of time or to make an agreement for employment other than at-will. Only the president of the Company has the authority to make any such agreement and then only in writing.”

In the advice memo, NLRB Associate General Counsel Barry J. Kearney concluded that “employees would not reasonably construe this provision to restrict Section 7 activity.”

The clause was different from those in the previous cases, according to Kearney, in that the language in those instances “more clearly involved an employee’s waiver of his Section 7 rights than the handbook provision here.”

The second guidance memo involved Arizona restaurant Mimi’s Café and a clause that read in part: “No representative of the Company has authority to enter into any agreement contrary to the foregoing ‘employment at will’ relationship.”

Kearney concluded that the language “does not explicitly restrict Section 7 activity. Moreover, there is no indication that the Employer promulgated its policy in response to union or other protected activity or that the policy has been applied to restrict protected activity.”

‘A step back’

Lawyers say the guidance offers clarification about how employers can avoid NLRA claims from workers or allegations from the NLRB that their at-will policies are overly broad.

The key difference between the at-will clauses in the cases in which NLRA violations were found and the permissible language outlined in the memos appears to be the point of view. Agreements binding employers pass muster; those binding employees do not.

“The [memos] draw a distinction between at-will language that could reasonably be construed by the employee as preventing them from seeking to alter their at-will status [and] at-will language that says that nothing in the handbook should be construed as altering the at-will employment status,” Faust said.

But the focus on at-will employment pacts is just the latest of a series of NLRB-related enforcement measures over the past 18 months — from the new notice posting rules that are the subject of legal challenges, to increased scrutiny of social media policies — keeping employment attorneys on their toes.

As a result, “periodically reviewing and updating handbooks as developments like this unfold has become standard practice,” Faust noted.

Luckily for most attorneys, the language in the at-will memos is similar to clauses used in many employment settings, Burton said.

The board’s counsel “seems to be reaffirming what I would call standard practices,” quelling some of the concern stemming from the earlier cases, she added.

“I’m happy they seem to have taken a step back,” Burton said. “The memos make clear that it wasn’t as bad as we thought.”