Originally published AUGUST 5, 2005
Many employers rely upon private separation agreements to avoid the risk of a potential lawsuit. According to at least one federal court of appeals, securing a waiver of a claim under the Family & Medical Leave Act ("FMLA") is not that easy.
On July 20, 2005, in Taylor v Progress Energy, Inc., the United States Court of Appeals for the 4th Circuit (covering Maryland, North Carolina, South Carolina, Virginia and West Virginia), invalidated a severance agreement to the extent that it released claims arising under the FMLA. The plaintiff asserted that she had been terminated for absenteeism that included days missed as a result of an FMLA-qualifying condition, and in retaliation for complaining about the company's failure to count the absences as protected FMLA leave. At termination, she received $12,000 in exchange for her execution of a waiver of all claims against the company. She thereafter filed a lawsuit alleging an FMLA violation and kept the severance payment.
In reversing the district court's order granting summary judgment to the employer based upon the release, the 4th Circuit relied upon the Department of Labor's ("DOL") regulation providing that "employees cannot waive, nor may employers induce employees to waive, their rights under the FMLA." It rejected the 5th Circuit's interpretation that this regulation only applied to prospective waivers (i.e., to claims that had not yet arisen) and held that the regulation was an appropriate exercise of the DOL's authority. While it acknowledged that public policy generally favored post-dispute settlement of claims, it concluded that without the non-waiver provision, "the unscrupulous employer could systematically violate the FMLA and gain a competitive advantage by buying out FMLA claims at a discounted rate." Therefore, consistent with the way courts treat Fair Labor Standards Act claims, the 4th Circuit held that FMLA waivers are only valid with the prior approval of the DOL or a court.
This case is troubling in that it undermines the finality that an employer expects to receive in exchange for a severance payment. In light of this decision, in the 4th Circuit, employers concerned about securing an FMLA waiver in exchange for severance should seek DOL, or court approval. In the 5th Circuit covering Louisiana, Mississippi and Texas, such approval generally is unnecessary. As the law in other circuits currently is unclear, employers should be aware that an FMLA waiver that is not approved by the court or DOL may be unenforceable. In consultation with counsel, employers should weigh this risk along with other factors, such as the amount it is willing to pay and the desire to obtain a release of other employment related claims which do not need court or DOL approval, when making decisions regarding severance agreements.
Policy Prohibiting Employees From Sharing Wage Information Found Illegal
Employers often include confidentiality policies in their employee handbooks in order to protect the employer's sensitive information, such as trade secrets, financial information, and customer lists. This is a legitimate concern, and employers have the right to discipline their employees for improperly disclosing such confidential information. But confidentiality policies that could be construed to prohibit employees from discussing their compensation can run afoul of federal labor laws designed to protect employees' right to engage in concerted activity.
The National Labor Relations Board recently considered the following confidentiality policy:
The policy further provided that the unauthorized release of confidential information could result in discipline.
The NLRB ruled that because the policy defined "any information" regarding "its partners" as confidential information, it unlawfully restricted the employees' right to discuss wages and other terms and conditions of employment with fellow employees, or with a union. Cintas Corp., 334 NLRB No. 118 (Jun. 30, 2005). The correct test, ruled the NLRB, was whether the confidentiality policy could reasonably be interpreted by its employees to restrict discussion of wages and other terms and conditions of employment with co-workers or with the union. Any ambiguities in the confidentiality policy must be resolved against the employer, the NLRB ruled, because of the potential "chilling effect" that the policy could have on employees.
An employer whose confidentiality policy violates this test will be ordered to rescind the offending language and furnish all employees with new handbooks (or inserts to existing handbooks) that either advise the employees that the language has been rescinded or provides the language of a new, lawful confidentiality policy. The employer in Cintas was also ordered to post notices in conspicuous places in the workplace advising employees that the policy has been rescinded, and that they have the right to join unions and engage in concerted activity for their own benefit and protection. Although the employer in the Cintas case did not discipline or discharge any employees for violating the policy, employers who enforce an unlawful policy are exposed to potential back pay and reinstatement remedies as well.
Employers should take care in drafting confidentiality policies for their handbooks. The temptation may be to draft the policy broadly, so as to protect as much information about your company as possible. But, as the Cintas case illustrates, a policy written too broadly can violate laws designed to protect employees' rights.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
