Jack Sullivan

The United States Supreme Court recently clarified the law that applies to federal workplace discrimination claims based on an employee’s allegation that he or she was transferred to a job they didn’t want for a prohibited reason. In Muldrow v. City of St. Louis, Justice Elena Kagan wrote for a unanimous Court and reversed the Eighth Circuit’s dismissal of a police sergeant’s sex discrimination complaint against the City of St. Louis. The sergeant alleged that her employer transferred her to a position that involved the same pay and rank, but with different (and to the sergeant, more unfavorable) job duties – and so violated Title VII of the Civil Rights Act of 1964. For context, when there is no direct evidence of discrimination, courts apply a burden-shifting framework. That requires a plaintiff first to show a “prima facie” case: that they were a qualified member of a protected class, that they suffered an adverse employment action, and that the employment action was connected to their membership in a protected group. If the plaintiff meets this standard, the employer/defendant can provide legitimate, non-discriminatory reasons to explain the employment action, and the plaintiff then has the chance to show those reasons are false, or “pretext.” However, if a plaintiff fails to establish a “prima facie” case—if the employment action wasn’t “adverse,” for example—the case cannot proceed to the next phase, and judgment for the defendant is usually appropriate. That is exactly how the Eighth Circuit handled this case: because Muldrow was provided the same pay and rank after her transfer, her complaints did not rise to affecting the “terms and conditions” of her employment, and the court therefore granted judgment to the defendant and dismissed her action. The Eighth Circuit specifically found that her objections to the new job duties did not cause a “materially significant disadvantage” to Muldrow because they represented “only minor changes in [her] working conditions.” In Muldrow, the Supreme Court reversed the judgment of the Eighth Circuit, thereby expanding the circumstances in which a plaintiff can successfully sue an employer for transferring the plaintiff to a position considered less desirable, even though it brings the same pay, benefits, and seniority. The Court reached its decision based on the text of Title VII: employers may not “discriminate against any individual with respect to [her] compensation, terms, conditions, or privileges of employment, because of such individual’s . . . sex.” While the parties agreed that Muldrow’s transfer implicated the “terms and conditions” of her employment, the Court broke with lower courts by finding that the term “discriminate against” does not require a showing of some special, significant harm: “‘Discriminate against’ means treat worse . . . . But neither that phrase nor any other says anything about how much worse.” (Slip. Op. at 6) (emphasis added). So, the Court reasoned that so long as a Title VII plaintiff alleges some harm resulting from a transfer, they have alleged an “adverse action” sufficient to establish a prima facie case. While the majority opinion provides little practical guidance, the ruling highlights some long-standing best practices for employers: Determine the specific reason for a transfer decision and document it. Under the Muldrow standard, it may be less likely defendants will be able to obtain dismissals based on the failure of a plaintiff’s prima facie case. Accordingly, employers must be prepared to explain their rationale for any transfer decision and back it up with documentation. If a business need justifies an individual’s transfer, ensure that reason is both sound and well documented. Use transfers carefully in personnel matters. Transferring an employee to a different division to cover a business need is straightforward enough. But when using transfers as a tool to eliminate workplace conflicts, employers should proceed extremely cautiously. To provide an example, it is typically unwise to transfer an employee who complains about coworkers harassing them without investigating and addressing any potential wrongdoing on the part of the coworkers. Where an employer transfers an individual and (a) it causes some harm to the employee and (b) the employer does not have a legitimate, non-discriminatory reason that explains the transfer in the face of an accusation that it was made because of a protected characteristic, then Title VII liability is possible.

Winter weather brings renewed attention to seasonal vaccines—and to employers’ interest in encouraging employees to remain healthy and productive, including potentially through efforts to require or incentivize workers to be vaccinated. While not as widespread today as they were during the pandemic, such rules and incentives trigger legal obligations to provide reasonable accommodations to employees who assert that vaccinations contravene a sincerely held religious belief or are inadvisable—even harmful—given a pre-existing disability. This article explains the current legal landscape employers face in evaluating requests for accommodations on the basis of religion or disability. It begins by explaining the recently announced standards for assessing requests for religious accommodations and summarizing the longstanding standards for assessing requests for disability-related accommodations. This article then surveys three recent court decisions applying accommodation standards in cases involving vaccines, explaining the legal standards applied by the deciding courts; and concludes with best practices for employers evaluating requests for religious and disability accommodations in light of current law, both in the context of vaccines and otherwise. Religious Accommodations under Title VII Title VII of the Civil Rights Act of 1964 (“Title VII”) prohibits covered employers from discriminating against employees and applicants on the basis of religion (as well as race, color, sex, and national origin). See 42 U.S.C. § 2000e-2(a). Prohibited discrimination on the basis of religion does not occur, however, in situations where the employer “demonstrates [it] is unable to reasonably accommodate an employee’s or prospective employee’s religious observance or practice without undue hardship on the conduct of the employer’s business.” See 42 U.S.C. §§ 2000e(j), 2000e-2(a). Title VII does not define “undue hardship” or “conduct of the business,” which instead have been interpreted by the courts. The current standard for evaluating religious accommodation requests was set on June 29, 2023, when the United States Supreme Court decided Groff v. DeJoy. 600 U.S. 447; 143 S. Ct. 2279 (2023). The Groff case involved an employee, Gerald Groff, who asked to be excused from Sunday work shifts that conflicted with his religious views of the Sabbath. 143 S. Ct. at 2286. When his requests were denied, Groff continued to decline to report to work, which led to ongoing discipline and his eventual resignation. Id. at 2287. Groff later sued, alleging that the Postal Service violated Title VII by failing to accommodate his religious practice and belief regarding the Sabbath. Id. The district court and Third Circuit ruled for the Postal Service, finding that exempting Groff from Sunday work caused an undue hardship on his employer under the then-applicable standard, which was that any burden on an employer that was “more than . . . de minimis” constituted “undue hardship” such that an accommodation could be denied. Id. Under that then-applicable standard, the circuit court’s reasoning was that changing Groff’s schedule would violate an agreement between the Postal Service and the union that represented Groff and unfairly burden other employees who would need to work his shifts. See id. The courts also indicated that Groff’s absences “imposed on his coworkers, disrupted the workplace and workflow, and diminished employee morale.” See id. The Supreme Court reversed. In a unanimous opinion authored by Justice Samuel Alito, the Court in Groff emphasized that Title VII focuses on “hardship,” a word choice that does not mean any mere burden. Id. at 2294. The Court further reasoned that the requirement that any hardship must be “undue” under Title VII indicated Congress’s intent that employers may have to bear meaningful costs to accommodate a religious employee. Id. Accordingly, the Court held, Title VII requires an employer seeking to deny an accommodation to demonstrate that the accommodation will substantially increase costs to its business—a significant change from the earlier standard, under which employers were effectively authorized to deny accommodations that required more than minimal cost of compliance. Id. at 2294-97. The Court then remanded the case for the lower courts to apply the standard set forth in the decision. Id. at 2297. Groff instructs lower courts to apply its standard on a case-by-case basis and assess proposed accommodations in a “common-sense manner,” with an eye on the “practical impact” of the accommodation in light of the size and nature of the employer’s business and all other facts on hand. The Court also clarified that employers may take into account the burdens an accommodation imposes on other employees as part of its assessment of the extent to which the accommodation affects the “conduct” of the employer’s business, id. at 2298 (Sotomayor, J., concurring), as long as those burdens affect the employer’s operations. Accommodations under the ADA The Supreme Court assessed the standard for reasonable accommodations related to disabilities under the Americans with Disabilities Act (“ADA”) more than 20 years ago, in US Airways, Inc. v. Barnett, 535 U.S. 391, 402 (2002). Barnett dealt with the conflict between an employer’s seniority system and an employee’s request to be assigned to a vacant position before other coworkers who had greater seniority, and thus greater entitlement to the position. 535 U.S. at 394. Under Barnett, once an employee shows that a requested accommodation is “possible,” the burden shifts to the defendant employer to “show special (typically case-specific) circumstances that demonstrate undue hardship in the particular circumstances.” Barnett, 535 U.S. at 402. Under the ADA, unlawful employment discrimination is defined to include the failure to make reasonable accommodations to the disability-related limitations of an otherwise qualified employee or job applicant, “unless [the employer] can demonstrate that the accommodation would impose an undue hardship on the operation of [its] business . . . .” 42 U.S.C. § 12112. The Equal Employment Opportunity Commission (“EEOC”) has stated that “undue hardship” under the ADA “means significant difficulty or expense and focuses on the resources and circumstances of the particular employer in relationship to the cost or difficulty of providing a specific accommodation.” Enforcement Guidance on Reasonable Accommodation and Undue Hardship under the ADA, https://www.eeoc.gov/laws/guidance/enforcement-guidance-reasonable-accommodation-and-undue-hardship-under-ada (EEOC Notice 915.002, October 17, 2002). “Undue hardship” refers not only to financial difficulty, but to reasonable accommodations that are unduly extensive, substantial, or disruptive, or those that would fundamentally alter the nature or operation of the business.” Id. Decisions Applying Groff in Vaccine Litigation Despite the similarities in the language of the “undue hardship” standards of the ADA and of Title VII, in Groff the Supreme Court rejected a request to use ADA cases in evaluating religious accommodations. Groff, 143 S. Ct. at 2295-96. The Court also declined to ratify EEOC guidance regarding religious accommodations, given that it was issued “without the benefit of the clarification we adopt today.” Id. at 2296. The Court did, however, refer favorably to the previously issued EEOC guidance regarding religious accommodations, stating that the justices expected “little, if any, change in the agency’s guidance explaining why no undue hardship is imposed by temporary costs, voluntary shift swapping, occasional shift swapping, or administrative costs” if needed to provide a religious accommodation. Id. Groff was cited 50 times by federal courts across the country through November 28, 2023, including approximately 30 cases that addressed COVID-19 vaccine mandates. Among these, the following three cases are instructive to employers assessing the legality of vaccine policies. Bordeaux v. Lions Gate Ent., Inc., No. 2:22-cv-04244-SVW-PLA, 2023 U.S. Dist. LEXIS 209626 (C.D. Cal. Nov. 21, 2023). In this case, the Central District of California expressly deferred deciding the employer’s motion for summary judgment on a Title VII religious-discrimination claim until after the Supreme Court decided Groff. 2023 U.S. Dist. LEXIS 209626, at *2-3. With supplemental briefing on Groff, the court granted the motion for summary judgment, finding that the actor’s requested exemption from a COVID-19 vaccine requirement created an undue hardship on the production company that did not re-hire her for a second season of a television program. Id., at *47-48. Focusing on the nature of the actor’s role on the program, the court concluded that her close, unmasked contact with other performers and crew members would expose those coworkers to a greater risk of COVID-19 infection and determined” “In and of itself, this safety risk constitutes an undue hardship.” Id., at *35-36. D’Cunha v. Northwell Health Sys., No. 23-476-cv, 2023 U.S. App. LEXIS 30612 (2d Cir. Nov. 17, 2023). This decision is the most recent federal appellate decision to apply Groff as of November 21, 2023. As with many cases surveyed since Groff, the plaintiff alleged both a religious-discrimination claim under Title VII and a disability-discrimination claim under the ADA, as she asked for a religious exemption from a COVID-19 vaccine mandate—and then a medical exemption after the religious exemption was denied. 2023 U.S. App. LEXIS 30612, at *3. The Second Circuit affirmed the dismissal of both the Title VII and the ADA claims. Id., at *8, 12. Applying Groff, the court noted that granting the requested exemption would have placed the hospital defendant in violation of New York State’s then-applicable 2021 mandate that all medically-eligible hospital personnel receive a COVID-19 vaccination and thereby exposed itself to potential penalties—which, in turn, would have been a burden “both ‘excessive’ and ‘unjustifiable.’” Id., at *8 (citing Groff, 143 S. Ct. at 2294). Lee v. Seasons Hospice, No. 22-CV-1593 (PJS/DJF), 2023 U.S. Dist. LEXIS 174927 (D. Minn. Sep. 29, 2023). Here, the  district court denied the private hospice defendant’s motion under Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss two plaintiffs’ claims alleging failures to accommodate their religious beliefs and failures to accommodate their disabilities. 2023 U.S. Dist. LEXIS 174927, at *11-12, 31. Applying Groff to the religious accommodation claim, the court found that its inquiry into defendant’s claims of undue hardship was necessarily fact-intensive—and so would require a factual record to decide, which was not available at the motion-to-dismiss stage of the case. Id., at *11-12. Best Practices for Employers Several best practices for employers responding to requests for accommodations arise from the Groff decision and those applying it, including: Assess requests for accommodations on a case-by-case basis. Employers should evaluate every employee’s request for an accommodation on its own merits, in light of the employee’s responsibilities and essential job functions. Consider alternatives. Determining that a requested accommodation poses an undue hardship does not end the analysis. If a requested accommodation is not feasible, employers reduce risk by working with the employee to determine if other, less burdensome accommodations would be effective from the employee’s perspective. Document factors that support decisions. As courts require employers to assess specific facts at issue with every employee’s request, employers should be ready to show that they have done such an assessment—through accurate documentation and recordkeeping. Reprinted with permission from the December 5, 2023 edition of the NEW YORK LAW JOURNAL © 2023 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. ALMReprints.com – 877-257-3382 – reprints@alm.com.

Abruzzo has been busy. Within the last few months, she has issued two notable memorandums that could have significant impacts on how employers must comply with the National Labor Relations Act (“NLRA”). It is important to note that certain provisions of the NLRA apply to all employers, not only those that currently have unions or are facing union election petitions. What was the first memorandum? Abruzzo issued a memorandum on March 22, 2023 in response to the NLRB’s decision in McLaren Macomb, 372 NLRB No. 58 (N.L.R.B. February 21, 2023). (We analyzed that decision in detail in another Quirky Questions blog post, linked here; in sum, the NLRB held in McLaren that an employer offering a separation agreement with non-disparagement and confidentiality provisions was inherently coercive, and therefore was facially a violation of the NLRA.).  One important thing to note: the logic and reasoning of McLaren likely apply equally to settlement agreements that resolve litigation brought by a former employee, in addition to separation or severance agreements entered at the time an employee’s employment ends. The General Counsel’s memorandum in response to McLaren went beyond explaining the ruling.  Instead, Abruzzo took the position that the decision not only applied to future separation agreements, but also applied retroactively – meaning that, in her view, employers who tried to enforce non-disparagement and confidentiality provisions in agreements with previously departed employees faced the risk of an unfair labor practice (“ULP”) charge under the NLRA. The memorandum also asserted that employers may maintain non-defamation clauses in separation agreements, but those clauses must be “narrowly-tailored, justified,” and “limited to employee statements about the employer that meet the definition of defamation as being maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity.” Finally, the memorandum outlined Abruzzo’s position that other provisions in separation agreements that might interfere with an employee’s Section 7 rights under the NLRA include non-compete clauses – a point on which she expanded earlier this week. What was the second memorandum? The second memorandum was issued on May 30, 2023, and expanded upon Abruzzo’s view that non-compete clauses violate the NLRA. In this memorandum, Abruzzo asserted that employers that require and enforce non-compete agreements with employees run afoul of the NLRA. Abruzzo believes that non-competition agreements chill an employee’s exercise of their Section 7 rights under the NLRA, because “employees know that they will have greater difficulty replacing their lost income if they are discharged for exercising their statutory rights to organize and act together to improve working conditions; employees’ bargaining power is undermined in the context of lockouts, strikes, and other labor disputes; and, an employer’s former employees are unlikely to reunite at a local competitor’s workplace, and, thus be unable to leverage their prior relationships—and the communication and solidarity engendered thereby—to encourage each other to exercise their rights to improve working conditions in their new workplace.” Abruzzo also argued in the memorandum that non-competition agreements discourage employees from exercising Section 7 rights because (1) any employees’ threats to resign in connection with demanding better working conditions will be seen as “futile” by the employer, since the employer knows the employee lacks access to other employment opportunities; (2) employees will refrain from actually resigning following a threat to do so in demanding for better working conditions; (3) employees are unable to seek or accept employment with competitors to obtain better working conditions; (4) employees are unable to solicit their co-workers to work for a competitor to obtain better working conditions; and (5) employees are unable to see employment with the goal of engaging in protected activity, such as union organizing, with other employees at their employer. While Abruzzo indicated there may be “special circumstances” in which a non-competition agreement is reasonable, such as protecting proprietary or trade secret information, or narrowly-tailored provisions “that clearly restrict only individuals’ managerial or ownership interests in a competing business, or true independent-contractor relationships,” she maintained that for the most part non-competition agreements are unenforceable. Abruzzo also categorically believes that an employer’s justification for a non-competition agreement will likely never be reasonable when the agreement is with “low-wage or middle-wage workers who lack access to trade secrets or other protectible interests, or in states where non-compete provisions are unenforceable,” and that “a desire to avoid competition from a former employee is not a legitimate business interest that could support a special circumstances defense.” Do Abruzzo’s memoranda carry the force of the law? No. In fact, the press release for the memorandum regarding McLaren includes a disclaimer stating that the McLaren memorandum represents Abruzzo’s views, not those of the NLRB. With that said, it is important to understand that Abruzzo’s memoranda are directives to NLRB prosecutors across the country, who now will be expected to view confidentiality provisions, non-disparagement provisions, and non-competition agreements as potential ULPs under the NLRA which, in turn, subject employers accused of the ULP to a range of sanctions that have been expanded by Abruzzo during her term in office. Finally, employers should also remember that non-competition agreements are under increasing scrutiny and greater legal restrictions across the country. In January 2023, the Federal Trade Commission proposed a rule banning almost all non-competes (on that proposed rule, our previous commentary is linked, here).  The FTC received a substantial number of comments on that proposed rule.  In addition, many states have passed recent legislation banning or limiting non-compete agreements, including a law that will take effect in the state of Minnesota on July 1, 2023.

It is safe to say that the use of artificial intelligence (AI) went mainstream in 2023. With the widening acceptance of AI, dozens of industries have raced to adopt the technology into various operations at a staggering pace – including adopting AI in human resources (HR) processes in the workplace. But, employers and HR departments should keep pace with federal agencies seeking to mitigate risks associated with AI in the workplace. AI in the Workplace AI in the workplace is moving at a fast clip. According to the Equal Employment Opportunity Commission (EEOC), as many as 83% of employers, and as many as up to 99% among Fortune 500 companies, are using some form of AI to screen or rank candidates for hiring. The use of AI in the workplace is not new from an HR perspective. Employers have long been able to use AI to perform certain HR functions in the recruiting process, such as resume screening. But now, employers can use AI for other recruitment functions, such as administering personality and aptitude tests or analyzing video interviews. Once workers are on-boarded, employers can use AI to help with worker safety, protection, management, and productivity through real-time locating systems and other technologies. Federal Agencies’ Guidance With the introduction of AI comes great benefits, several federal agencies seek to cut in on potential consequences by issuing guidance, requesting information, and devising plans for AI in the workplace in the following ways: On January 26, 2022, the federal Occupational Safety and Health Administration (OSHA) issued a trade release announcing an update and expansion of a chapter in the OSHA Technical Manual on Industrial Robot Systems and Industrial Robot System Safety. The update notes that advances in AI boost the abilities and uses of robot systems in industrial applications. The revisions add current “technical information on the hazards associated with industrial and emergent robot applications, safety considerations for employers and workers, and risk assessments and risk reduction measures.” On May 12, 2022, the EEOC issued its guidance on AI “discuss[ing] how existing ADA requirements may apply to the use of [AI] in employment-related decision making and offers promising practices for employers to help with ADA compliance when using AI decision making tools.” The same day, on May 12, 2022, the Department of Justice reported issued guidance that “outlines issues that employers should consider to ensure that the use of software tools in employment does not disadvantage workers or applicants with disabilities in ways that violate the ADA.” On October 31, 2022, the National Labor Relations Board (NLRB) General Counsel issued a memorandum recommending that the NLRB “apply the Act to protect employees, to the greatest extent possible, from intrusive or abusive electronic monitoring and automated management practices that would have a tendency to” interfere with protected concerted activity. On January 10, 2023, the EEOC issued a draft strategic enforcement plan which announced that the agency would focus “on employment decisions, practices, or policies in which covered entities' use of technology contributes to discrimination based on a protected characteristic. These may include, for example, the use of software that incorporates algorithmic decision-making or machine learning, including artificial intelligence; use of automated recruitment, selection, or production and performance management tools; or other existing or emerging technological tools used in employment decisions.” On May 1, 2023, the White House Office of Science and Technology Policy (OSTP) announced that it will be releasing a public request for information (RFI) “to learn more about the automated tools used by employers to surveil, monitor, evaluate, and manage workers.” The OSTP states that responses to the RFI “will be used to inform new policy responses, share relevant research, data, and findings with the public, and amplify best practices among employers, worker organizations, technology vendors, developers, and others in civil society.” On May 18, 2023, the EEOC issued its guidance explaining the application of Title VII to an employer’s use of automated systems, including AI, noting that the scope of the guidance “is limited to the assessment of whether an employer’s ‘selection procedures’—the procedures it uses to make employment decisions such as hiring, promotion, and firing—have a disproportionately large negative effect on a basis that is prohibited by Title VII.” Employers should expect to see more federal guidance on AI as technologies continue to develop. What Employers Can Do to Stay in the AI Race With federal agencies’ guidance in mind and an expectation of more regulation to come, employers should take proactive steps to ensure the use of AI in the workplace keeps pace with developing law. These steps include: Understanding that AI in the workplace is governed by several different laws, including privacy laws, data security laws, and anti-discrimination laws at the state and federal levels. Considering including references to the use of AI in the recruiting, hiring, and employment process in employment policies and notices. Partnering with HR, IT, and legal counsel to ensure that AI practices remain competitive while compliant with local and federal law. For additional information on employer considerations before using AI and automated decision-making systems in the workplace, check out a previous Quirky Questions article on the topic. The idea that AI can create numerous benefits in the workplace seems to be gaining traction. Federal guidance issued in 2022 and 2023 signal that regulation of AI in the workplace will strive to keep up with the strides made in technological advances. Employers and HR can stay ahead of the curve by keeping abreast of, and following, regulations applicable to their company.

Employee reductions and terminations are an unfortunate result of economic downturns. Even during good economic times, many companies face the need to reduce their workforce or terminate the employment of individual employees. In such circumstances, employers may seek to offer severance pay in exchange for certain releases and promises by the departing employee requiring a severance agreement. The drafting of severance agreements can be complex, given that there are various federal and state laws that prohibit or narrow the provisions that can be included in the severance agreement. The use of confidentiality and non-disparagement provisions has recently come under scrutiny again.  This article summarizes the legal issues that an employer must consider when deciding whether to include such provisions in a severance agreement. What is the impact of the National Labor Relations Board’s decision in McLaren On February 21, 2023, the National Labor Relations Board (“NLRB”) issued a decision, McLaren Macomb, 372 N.L.R.B. No. 58 (2023), finding that an employer violated Section 7 of the National Labor Relations Act (“NLRA”) by offering employees a severance agreement containing provisions stating that the terms of the agreement were confidential and prohibiting the employee from making any disparaging statements about the employer.  Even if the employee ultimately did not sign the agreement, the NLRB found that the mere proffer of these terms to the employees as part of a severance package could be a violation of the NLRA.  Communications by covered employees are protected by Section 7 even if they contain comments that would be considered “disparaging” towards the employer. Does McLaren apply to non-union workplaces? Yes.  Section 7 of the NLRA protects employees’ right to engage in concerted activity for “mutual aid and protection,” which includes discussing the terms and conditions of their employment.  Section 7 applies in union and non-union workplaces. Does McLaren apply to all severance or separation agreements?? No. Only individuals who meet the statutory definition of “employees” – which does not include executives, supervisors, and most managers – have rights under Section 7 of the NLRA. Does the NLRB’s decision mean confidentiality and non-disparagement provisions can no longer be included in severance agreements? Not necessarily.  Employers will now, however, have to engage in a risk assessment in determining whether to include such provisions. For example, in reductions in force (“RIFs”) where the severance is formula-based, the need to include a confidentiality provision is diminished by the fact that there will be many departing employees. Therefore, prohibiting the departing employees from discussing their severance agreements with fellow co-workers who were selected for the RIF adds very little value to the employer. In contrast, where a severance agreement is presented to an individual employee as a compromise, employers may include a confidentiality provision with a definition of “Confidential Information” that is tailored to avoid implicating the terms and conditions of employment that are the core protections of Section 7 of the NLRA. Similarly, following the McLaren decision, employers that want to continue to include non-disparagement provisions in severance agreements could  do so only with specific language. Non-disparagement provisions should, for example, be narrowly tailored to prohibit defamatory statements in accordance with the defamation laws in the applicable jurisdiction to be permissible under McLaren. Is this the first time a federal agency has taken action with regard to provisions in these types of agreements?   No.  The Equal Employment Opportunity Commission (“EEOC”) is another federal agency keeping an eye on confidentiality and non-disparagement provisions in severance agreements.  The EEOC has taken the position that no agreement between a departing employee and an employer can limit the departing employee’s right to testify, assist, or participate in an investigation, hearing, or proceeding conducted by the EEOC.  In addition, the EEOC has stated that limiting an individual’s ability to file a charge or participate in an investigation constitutes retaliation in violation of federal employment law.  Any confidentiality or non-disparagement provision in a severance agreement that attempts to waive these rights is subject to challenge by the EEOC. Similarly, the Securities and Exchange Commission (“SEC”) prohibits employers from taking any action that impinges upon an employee’s ability to bring complaints to the SEC.  SEC Rule 21F-17, enacted under the Dodd-Frank Act, prohibits any action that would “impede an individual from communicating directly with the [SEC] staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement. . .with respect to such communications.” Indeed, the SEC has fined employers for using language that prohibits employees from speaking with the SEC without prior approval from the employer. Thus, employers may not use severance agreements with departing employees that prohibit or discourage departing employees from reporting alleged violations to the SEC. It is important to include language in each severance agreement, even for employers that are not publically traded, that states that the departing employee may speak freely with federal agencies such as the SEC without first seeking approval from the employer. Aren’t there also restrictions related to settlements of claims involving sexual harassment? Yes.  In response to #metoo, various states introduced or enacted legislation restricting the use of confidentiality provisions in agreements settling sexual harassment-related claims.  Each piece of legislation has its own nuances regarding the types of language which are prohibited and the consequences of violating the restrictions. These are just a few of the key issues to consider when drafting a severance or settlement agreement. It is always best practice to speak with an employment attorney when drafting severance agreements to ensure compliance with federal, state, and local laws.

Today’s workforce is more mobile than in past generations. Long gone are the days when an employee started and ended a career at the same company. Knowing how to protect your company’s confidential information when a trusted employee leaves can have a lasting impact on your ability to compete. So, what can you do when a former employee goes to work for a competitor? Is having an irreparable injury provision in your non-compete agreement enough to obtain a court order prohibiting that individual from working at his/her new job? In Minnesota, courts want to see more than just words in a contract before they will grant injunctive relief against a former employee. This week, the Supreme Court of Minnesota issued a decision in St. Jude Medical, Inc. v. Carter. The case arose after Heath Carter left his employer to work for a competitor. The employer filed suit against Mr. Carter and the competitor, alleging violations of Mr. Carter’s non-compete agreement. The employer did not seek money damages but asked the court for injunctive relief; specifically, an order enforcing the terms of the non-compete agreement and prohibiting Mr. Carter from working for a competitor in his then-current position. The case went to a jury, which ultimately found that Mr. Carter had breached his non-compete agreement. But the court refused to enter an injunction, finding that the employer failed to establish that it had been harmed. The case made its way to the Supreme Court, where the question became what to do about specific language in the non-compete agreement that addressed the issue of whether and how the former employer was harmed. The language at issue is commonly included in many non-compete agreements: In the event Employee breaches the covenants contained in this Agreement, Employee recognizes that irreparable injury will result . . . that [the Employer’s] remedy at law for damages will be inadequate, and that [the Employer] shall be entitled to an injunction to restrain the continuing breach by Employee. At first glance, the provision appeared to resolve the issue of whether the employer suffered irreparable harm—Mr. Carter agreed that it had. But the Supreme Court disagreed. The court noted that “[a] private agreement is just that: private,” and concluded that such contractual language does not, by itself, entitle an employer to an injunction after proving the breach of a non-compete. The court emphasized that regardless of what the parties agree to, the burden will always fall on the employer to show that: (1) legal remedies (i.e., money damages) are inadequate; and (2) “great and irreparable injury” will result without an injunction. Because the employer did not offer proof of an irreparable injury, the court held that the employer was not entitled to an injunction. So what now? Are provisions like those quoted above meaningless? Should employers scramble to re-write their non-compete agreements? The short answer is “probably not.” Minnesota aligns with a number of states in which mere contractual language about irreparable harm is not enough to win injunctive relief. Nevertheless, these provisions are still worth including in non-compete agreements because courts can consider them as one of many factors that bear on whether an employer has suffered irreparable harm. Other factors will usually be more persuasive, often including evidence of some or all of the following: The departing employee took confidential information when he or she left (e.g., client lists, marketing plans, and pricing information). The departing employee disclosed confidential information to the competitor or put confidential information to use in the new job. The departing employee solicited business from former clients or customers and used confidential information to solicit such business. The former employer lost client or customer goodwill because of the departing employee’s breach of the non-compete agreement. Ultimately, Carter serves as a useful reminder to employers on both sides of an employee’s job change. Former employers should carefully consider how they have been harmed by an employee’s departure (and what evidence they anticipate being able to present as proof of that harm). Hiring employers should understand and reinforce to their new employees the importance of complying with prior non-compete agreements. And for employers on both sides, consulting with experienced employment attorneys even before these types of cases go to litigation can be the key to a successful outcome.