New York law requires employers to report newly hired or rehired employees and the engagement of certain independent contractors to the New York State Department of Taxation and Finance. Below is a summary of employer’s reporting requirements under the law ( the “New Hire Reporting Law”).

Who is an “employer” under the New Hire Reporting Law?

An “employer” means any individual or entity that withholds tax under the Internal Revenue Code of 1986 (§3401(d)), including any governmental entity (other than federal agencies that report directly to the National Directory of New Hires) and any labor organization. Multi-state employers may elect to designate New York as their reporting state or another state in which they have employees.

Who is an “employee” under the New Hire Reporting Law?

An “employee” means any individual who is an employee as defined under the Internal Revenue Code of 1986 (Chapter 24) who will be employed in New York State.

An employee is considered “rehired” if the employee returns to work after 60 calendar days or more. For instance, an employee that works seasonally may be considered rehired. However, teachers, professional athletes and other staff at such institutions are not considered rehired, because they are paid an annual salary even though they may not report to work for 60 or more days.

Any temporary employees paid directly by an employer must also be reported.

Who is an “independent contractor” under the New Hire Reporting Law?

An “independent contractor” means any individual under an independent contractor arrangement with contract(s) in excess of $2,500. Additionally, New York law requires written contracts for any independent contractor to provide services in exchange for an amount equal to or greater than $800, either by itself or when aggregated with all contracts for services between the same parties during the immediately preceding 120 days (see our post here).

What information must employers report under the New Hire Reporting Law?

Employers must report the employee’s or independent contractor’s full legal name, street address, social security number, hire date, and whether such individual is eligible for dependent health insurance benefits and the day of qualification for such benefits. Additionally, employers must report their own name, address and tax identification number.

When do employers need to report under the New Hire Reporting Law?

Employers must report new hired or rehired employees within 20 calendar days from the hiring date. The hiring date is the first day the employee performs services for which they will be paid wages, tips, commissions or any other type of compensation.

Where do employers report new hire information under the New Hire Reporting Law?

Employers must report new hire information to the New York State Department of Taxation and Finance. New hire reports can be filed electronically on the New York New Hire Online Reporting Center. Additionally, new hire information can be filed via the mail or facsimile transmissions, but these submission types do not apply for reporting of independent contractors.

What are the penalties for an employer failing to timely report new hire information?

If an employer fails to timely report new hire information, then a $20 penalty per employee not reported will be imposed against the employer. Also, if an employer fails to file a complete report with all the required new hire information, then a $20 penalty per false or incomplete report will be imposed against the employer.

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For further information or guidance on revising your policies and procedures, please contact David Paseltiner or Rose Egan. For guidance on any labor or employment related litigation, please contact our Labor and Employment Practice Group.

In 2018, New York State enacted the Paid Family Leave Benefits Law (“PFL”), which is employee-funded insurance to allow eligible employees to take paid, job-protected time off to care for a family member. The amount of leave and pay has periodically increased since 2018. Currently an eligible employee may take up to 12 weeks of paid time off and receive 67% of their average weekly wage, up to a cap of 67% of the current New York State Average Weekly Wage. For 2025, the NYS Average Weekly Wage is $1,757.19, which means the maximum weekly benefit is $1,177.32.

What employers are covered by PFL?

PFL applies to any person, partnership, association, corporation, legal representative of a deceased employer, or the receiver or trustee of such person or entity, other than the state, a municipal corporation, local governmental agency, other political subdivisions or public authority (“Covered Employer”) who has in employment one or more employees on each of at least 30 days in any calendar year. Additionally, a covered employer includes an employer of personal or domestic employees in a private home after the expiration of four weeks following the employment of one or more personal or domestic employees who work for a minimum of 20 hours per week for such employer and are employed on each of at least 30 days in any calendar year.

Additionally, public employers may opt in to provide PFL benefits to their employees.

What is an employer required to do under PFL?

A Covered Employer is required to:

  • Obtain Paid Family Leave insurance coverage, whether through a third-party insurer (generally as an add on to an existing disability insurance policy) or if the employer is self-insured for disability, it may apply to the NYS Workers’ Compensation Board to self-insure.
  • Post a notice of compliance in plain view and inform their employees about their rights under the PFL. A notice of compliance to employees stating the insurance carrier will be provided by the carrier and should be posted in plain view. If the employer is self-insured, then the NYS Workers’ Compensation Board will provide such notice and it should be posted in plain view. Additionally, an employer’s paid family leave policy is typically provided in an employee handbook. New York State has provided some model language for employers and other employer resources on its website.
  • Identify employees who qualify for a waiver and provide them with a waiver form. Coverage can only be waived if the employee will not meet the minimum time worked requirements, in other words: if they regularly work less than 20 hours per week and will not work 175 days in a year, or if they regularly work 20 or more hours per week, but will not be in employment for 26 consecutive weeks. If an employee waives coverage, they will not make contributions and will not be eligible for PFL benefits.
  • Collect employee payroll contributions. The employee contribution rate is set every year by the Department of Financial Services to match the cost of insurance coverage.
  • Respond to Employee Request for Leave within three business days by completing Part B – Employer Information of the PFL-1 Form.
  • Reinstate the employee to their same or comparable position within 30 days of employee’s Formal Request for Reinstatement (Form PFL-DC-119). An employer cannot discriminate or retaliate against an employee for requesting and/or taking paid family leave.

When are employees eligible for coverage under PFL?

An employee of a Covered Employer that is scheduled to work 20 or more hours per week is eligible for PFL benefits after 26 consecutive weeks of employment with the employer. An employe that is scheduled to work less then 20 hours per week is eligible for PFL benefits after 175 days of employment, which do not need to be consecutive.

What is permitted family leave under PFL?

“Family leave” means any leave taken by an employee from work:

  • to participate in providing care, including physical or psychological care, for a family member of the employee made necessary by a serious health condition of the family member; or
  • to bond with the employee’s child during the first 12 months after the child’s (i) birth, or (ii) placement for adoption or foster care with the employee; or
  • because of any qualifying exigency as interpreted under the Family and Medical Leave Act (“FMLA”), arising out of the fact that the spouse, domestic partner, child, or parent of the employee is on active duty (or has been notified of an impending call or order to active duty) in the armed forces of the United States.

Note that family leave is to take care of a family member and not for the employee to care for oneself, which may be otherwise covered under disability law.

Who is a family member under PFL?

“Family member” includes:

  • A child, including a biological, adopted, foster, or step-child, a legal ward, a son or daughter of a domestic partner, or the person to whom the employee stands in loco parentis;
  • A parent, including a biological, foster, or adoptive parent, a parent-in-law, a stepparent, a legal guardian, or other person who stood in loco parentis to the employee when the employee was a child;
  • A grandparent, meaning a parent of employee’s parent;
  • A grandchild, meaning a child of employee’s child;
  • A sibling, including a biological or adopted sibling, a half-sibling or stepsibling; and
  • A spouse or domestic partner.

What is a serious health condition under PFL?

Under the PFL, a “serious health condition” means an illness, injury, impairment, or physical or mental condition, including transplantation preparation and recovery from surgery related to organ or tissue donation, that involves inpatient care in a hospital, hospice, or residential health care facility, continuing treatment or continuing supervision by a health care provider. Continuing supervision by a health care provider includes a period of incapacity which is permanent or long term due to a condition for which treatment may not be effective where the family member is under the continuing supervision of, but need not be receiving active treatment by, a health care provider.

How are PFL benefits funded?

New York PFL is insurance funded by employees through payroll deductions up to a maximum annual cap. For 2025, employees contribute 0.388% of their gross wages per pay period, with a maximum annual contribution of $354.53. Employees earning less than the current NYS Average Weekly Wage of $1,757.19 contribute less than the annual cap of $354.53, consistent with their actual wages. A PFL wage deduction calculator is available on the  website here.

What are the PFL benefits for employees?

From the first full day of when family leave is required, an employee will receive a portion of their average weekly wage and continued health insurance coverage (provided the employee pays the necessary premiums) during their job-protected family leave. An eligible employee receives 67% of their average weekly wage, up to a cap of 67% of the current New York State Average Weekly Wage. For 2025, the NYS Average Weekly Wage is $1,757.19, which means the maximum weekly benefit is $1,177.32. A PFL wage benefit calculator is available here.

New York State Department of Taxation and Finance (“NYSDTF”) issued a notice providing guidance for New York employers, employees and insurance carriers, including self-insured employers. NYSDTF advised that PFL wage benefits paid are taxable and employers should report employee contributions on Form W-2.

How long can paid family leave be under PFL?

An eligible employee may take up to 12 weeks of paid family leave in every 52-week period based on a rolling calendar. This means that if an employee used the full 12 weeks of leave, the next time such employee would be eligible to take paid family leave again is one year from their first day of such prior leave. As an example, if an employee took 12 weeks of paid family leave starting on May 1, 2025, then their leave eligibility period would renew on May 1, 2026.

Paid family leave must be taken in full day increments, though family leave does not need to be consecutive days.

How does PFL affect other benefits?

FMLA

If an employer is covered under both PFL and FMLA and the employee has an event that qualifies for leave under both laws, the employer can require them to run concurrently. In order for the two types of leaves to run together, the employer must notify the employee that the leave qualifies for both FMLA and PFL, and that it will be designated as such.

Short-Term Disability

After giving birth, an employee may be eligible for both short-term disability benefits and PFL benefits. While the two benefits cannot be taken at the same time, eligible employees can choose to immediately take all or any portion of their available short-term disability weeks and then take paid family leave at any time within the first 12 months after birth.

Parental Leave and Accrued Time (Sick or Vacation)

It is up to the employer to determine how paid family leave works with their other parental leave and paid time off policies. If an employer allows employees to use accrued leave time to supplement PFL benefits in order to receive their full pay, then the employer may seek reimbursement from its insurance carrier.

Paid time off would be covered by the same rights and protections afforded to employees under PFL, including the right to keep health insurance and the right to be reinstated to the same job (or a comparable one) when the employee returns from leave.

What discrimination or retaliation is prohibited under PFL?

An employer cannot:

  • Terminate the employee or refuse to return an employee to their same or a comparable position. An employee must submit a Formal Request for Reinstatement Regarding Paid Family Leave Form to the employer and the employer must respond within 30 days.
  • Reduce the employee’s pay or benefits, or
  • Discipline an employee

because the employee requested or took paid family leave.

What are the penalties for an employer discriminating or retaliating against an employee under PFL?

If an employer is found to have discriminated or retaliated against an employee for requesting and/or taking paid family leave, then an administrative law judge may order an employer to reinstate the employee, pay any lost wages, pay attorney’s fees, and pay up to $500 in penalties.

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For further information or guidance on revising your employment policies and procedures, please contact David Paseltiner or Rose Egan.

On August 20, 2024, the United States District Court for the Northern District of Texas issued a Memorandum Opinion and Order setting aside, on a nationwide basis, the Federal Trade Commission’s (“FTC”) Non-Compete Rule (Ryan LLC v. Federal Trade Commission (3:24-cv-986)). The Court decided that the FTC’s Non-Compete Rule was unlawful and exceeded the FTC’s statutory authority. As a result, the FTC’s Non-Compete Rule will not go into effect or be enforceable unless and until the FTC successfully appeals this decision.

As a result, non-compete and similar agreements that would have been subject to the Rule will continue to be enforceable if they otherwise comply with applicable state law. Several states have limited non-compete clauses for employees to various degrees. For instance, several states, like California, Minnesota, North Dakota and Oklahoma, have full or near total non-compete bans while other states have limited non-compete bans to certain industries (such as New York) or set income restrictions (like Maine, Virginia, and Washington). Even if a state does not have a statutory restriction on non-competes, the enforceability of non-compete agreements remains subject to judicial review. Ultimately, courts are left to decide the reasonableness in applying non-compete agreements in their jurisdiction. Also, the Texas decision does not prevent the FTC from addressing noncompete agreements through “case-by-case” enforcement actions.

The FTC may appeal the Ryan LLC decision to the 5th Circuit Court of Appeals. However, it seems unlikely that the appellate court will allow the Non-Compete Rule to go into effect while any appeal is pending. We will post updates if an appeal is filed.

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Employers should clarify if their non-compete agreements comply with applicable state law. For further information or guidance on revising your policies, procedures, and agreements, please contact David Paseltiner, Robert Londin or Rose Egan.

As we discussed in an earlier post, the Federal Trade Commission (“FTC”) issued a final rule prohibiting post-employment non-compete clauses for workers in the United States. FTC’s final rule takes effect on September 4, 2024. However, the rule is currently being litigated in several jurisdictions, including applications for preliminary injunction to prevent it from going into effect. Two such cases, discussed below, have differed in denying the preliminary injunction and granting the preliminary injunction with regard to the subject plaintiffs in such case only.

On July 23, 2024, the United States District Court for the Eastern District of Pennsylvania denied plaintiff’s motion for preliminary injunction in ATS Tree Services, LLC v. Federal Trade Commission, et al. (2:24-cv-1743). The Court found that plaintiff failed to show irreparable harm or that it was likely to succeed on the merits of their challenge to the FTC’s Non-Compete Rule.

Alternatively, as previously noted in our labor and employment blog, the United States District Court for the Northern District of Texas granted a motion for preliminary injunction for the subject plaintiffs in the Ryan LLC case. In the coming weeks, the parties in the Ryan LLC case will fully brief a motion for summary judgment and Judge Brown has stated her intent to decide on the merits of the case by August 30, 2024.

A third case seeking preliminary injunction is pending in United States District Court for the Middle District of Florida, entitled Properties of the Villages, Inc. v. Federal Trade Commission (5:24-cv-000316). A hearing is scheduled on plaintiff’s motion for preliminary injunction on August 14, 2024.

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Despite pending litigation, in the next few weeks, employers and business entities should proactively review their policies, procedures and agreements for any non-compete clauses and determine which employees will need to be notified by September 4, 2024 that their non-compete are no longer binding, should the FTC’s rule not be enjoined or ruled unconstitutional. Additionally, those policies and agreements containing non-compete clauses will need to be revised to ensure compliance with the FTC’s final rule.

We will provide updates as matters develop with respect to FTC’s final rule and its pending litigation. For further information or guidance on revising your policies, procedures, and agreements, please contact David Paseltiner, Robert Londin or Rose Egan.

As we discussed in an earlier post, the Federal Trade Commission (“FTC”) issued a final rule prohibiting post-employment non-compete clauses for workers in the United States. FTC’s final rule takes effect on September 4, 2024. However, the rule is currently being litigated in several jurisdictions, including applications for preliminary injunction to prevent it from going into effect.

One such case is Ryan LLC v. Federal Trade Commission (3:24-cv-986), filed in the United States District Court for the Northern District of Texas. On July 3, Judge Ada Brown issued an order granting a preliminary injunction for the plaintiffs following a determination that they are substantially likely to prevail on the merits of their challenge to the FTC’s Non-Compete Rule. Judge Brown’s opinion cited to a recent U.S. Supreme Court decision (Loper Bright Enterprises v. Raimondo), in which the Supreme Court overturned a longstanding precedent, known as the Chevron doctrine, where judicial courts deferred to an administrative agency’s interpretation of ambiguous laws which the agency was charged with enforcing.

In the coming weeks, the parties in the Ryan case will fully brief a motion for summary judgment and Judge Brown has stated her intent to decide on the merits of the case by August 30, 2024.

Furthermore, another challenge to the FTC’s non-compete rule is pending in the United States District Court for the Eastern District of Pennsylvania, ATS Tree Services, LLC v. Federal Trade Commission, et al. (2:24-cv-1743). A decision in the ATS case may be issued in the next few weeks.

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Despite pending litigation, in the next few weeks, employers and business entities should proactively review their policies, procedures and agreements for any non-compete clauses and determine which employees will need to be notified by September 4, 2024 that their non-compete are no longer binding, should the FTC’s rule is not enjoined or ruled unconstitutional. Additionally, those policies and agreements containing non-compete clauses will need to be revised to ensure compliance with the FTC’s final rule.

We will provide updates as matters develop with respect to FTC’s final rule and its pending litigation.

For further information or guidance on revising your policies, procedures, and agreements, please contact David Paseltiner, Robert Londin or Rose Egan.

The New York labor law requires every employer, no matter its size (including a family business), to adopt a sexual harassment prevention policy that meets or exceeds the minimum standards set by New York State. Every such policy must include examples of prohibited conduct, a complaint form, procedures for investigation of any complaint, information on all available forums for adjudicating sexual harassment complaints and provide annual interactive training sessions for all employees located in New York State.

All employees (including minor employees) must receive annual sexual harassment prevention training. The annual trainings must be interactive, including requiring the employees to respond to questions based on the training and allowing employees to ask questions. The trainings do not need to be live to be interactive.  Training sessions can be provided online with a question and answer sheet that employees can complete (either electronically or in hard copy) and submit to the employer. Employers must answer employee questions in a timely manner, if the training is not live. Any employees under the age of 14 may receive a simplified version of training and policy, though it must still meet the minimum state requirements. Employers should retain records of the annual trainings and employee completion.

Recently, New York State updated the model prevention policy requirements, including an expanded number of foreign languages in which employers must provide notices, claim forms and trainings. The foreign languages now included are Bengali, Chinese, Hatian-Creole, Korean, Italian, Polish, Russian, and Spanish. At the time of hire and during annual training sessions, employers must provide the sexual harassment prevention policy in writing, in English and in any other primary language indicated by an employee to his or her employer. New York State has provided written training information and case studies in these languages, which are available here.

Additionally, the law protects employees from harassment by third parties, including customers, clients, outside vendors, independent contractors and gig workers. Thus, the law requires family businesses and households that employee even one domestic worker (such as a nanny or housekeeper) to adopt a sexual harassment prevention policy and related annual training.

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For further information or guidance on revising your policies and procedures, please contact David Paseltiner or Rose Egan.

President Biden signed into law the “Providing Urgent Maternal Protections for Nursing Mothers Act” (“PUMP Act”) on December 29, 2022.   The PUMP Act expands employer obligations under the Fair Labor Standards Act (FLSA) and addresses the needs of nursing women in the work force.  It provides that for up to one year, an employer must allow an employee who is nursing a child to have reasonable break time to express breast milk.

A nursing employee who wants to express milk while at work has a right to do so in private.  Pursuant to the Act, a nursing employee is entitled to a place that is shielded from view and free from intrusion by coworkers or the public to express milk.  A bathroom is not considered a permissible location.  Employers may create permanent, dedicated spaces for employees to express breast milk, but are not required to do so.  If the space provided by the employer is not a dedicated space for use by nursing employees, in order to be compliant with the law, the private space must be made available when the employee needs it.

The frequency and duration of the breaks needed by an employee to express milk depend on factors related to the specific employee.  There is no requirement that a nursing employee be paid for the time spent while on her break provided that she is completely relieved from her work duties during the break, otherwise she must be compensated as work time.  In addition, if the employer provides compensated breaks for its employees, an employee who uses her break time to express milk must be compensated in the same way as other employees.  Moreover, if the employee is at least partially working during her break, the time is considered paid working time for purposes of calculating minimum wage and overtime.

All employers covered by the FLSA must comply with the PUMP Act requirements except that an employer with fewer than fifty employees is not subject to the law’s break time requirement if it can demonstrate that compliance would impose an undue hardship causing significant difficulty or expense, which is often difficult to do.

While the PUMP Act is a federal law which provides certain protections and rights for nursing workers, employers need to also be aware that New York provides similar, and in some instances greater, protections under state law.  For example, New York Labor Law Section 206-c also requires an employer to provide a nursing mother with break time to express breast milk at work.  While the PUMP Act covers nursing employees for a period of one year, New York expands the period to three years. The Labor Law also requires that the space be in close proximity to the work area, and, at minimum, have a chair, a working surface, nearby access to clean running water and, if the workplace is supplied with electricity, an electrical outlet.  If the workplace has access to refrigeration, the employer must allow access to it for the purpose of storing the expressed milk.  The state law applies to all public and private employers in New York State, regardless of the size or nature of their business.

Finally, it is a violation of both the federal and state law to discriminate against an employee for requesting or receiving break time to express breast milk.

For further information or guidance on how this law may affect your business, or for assistance in revising your policies and procedures in accordance with this law, please contact Stanley A. Camhi at scamhi@jaspanllp.com.

The Gender Expression Non-Discrimination Act (“GENDA”) was signed into law by Governor Cuomo in January 2019.  The law added gender expression and gender identity to the State’s Human Rights Law as a protected class and prohibits unlawful discrimination in employment, housing, and public accommodations based on a person’s gender identity or expression.

GENDA defines gender identity or expression “as a person’s actual or perceived gender related identity, appearance, behavior, expression, or other gender-related characteristic regardless of the sex assigned to that person at birth, including, but not limited to, the status of being transgender.”  The law also recognizes “gender dysphoria”, a medical condition in which a person has psychological distress resulting from an incongruence between one’s sex assigned at birth and one’s gender identity (DSM-5-TR), as a disability.  So, for example, in the context of employment, a person suffering from gender dysphoria may be entitled to a reasonable accommodation at work, unless it would impose an undue hardship on the employer.

Under the law New Yorkers have the right to use their requested name regardless of their appearance, medical history or the sex indicated on their identification, and it is a violation for an employer or other entity covered by the law to refuse to use the person’s requested name, pronoun, or title. Thus, for example, if Rose, a transgender individual, wishes to be referred to by a different name, an employer must honor the request.

It is also a violation of the law to impose unequal terms, conditions or benefits based on a person’s gender identity or expression.  Other prohibited conduct include:

  • Refusing to allow individuals to use facilities consistent with their self-identified gender regardless of the person’s sex assigned at birth.
  • Requiring a person to use a single-occupancy bathroom because they are transgender when multi-occupancy facilities are available.
  • Imposing appearance standards based on sex stereotypes.
  • Denying equal opportunities for advancement because of a person’s gender identity or expression.
  • Making threatening or humiliating comments or engaging in name calling because of a person’s gender identity or expression.
  • Refusing to hire a person because of their gender identity or expression.
  • Refusing to rent an apartment to a person because of their gender identity or expression.

These, of course, are only a few examples of how the law may impact upon your business operations.  It is important that this change in the law be kept in mind and implemented in order to avoid potential liability.

For further information or guidance on how this law may affect your business, or for assistance in revising your policies and procedures in accordance with this law, please contact Stanley A. Camhi at scamhi@jaspanllp.com.

Signing the agreement in the contract.

As discussed in my recent blog, the National Labor Relations Board (NLRB) in its McLaren Macomb  decision has ruled that confidentiality clauses which prohibit an employee from disclosing the terms of her or his severance agreement and clauses that prohibit an employee from disparaging their employer as conditions to receipt of a severance payment violate such employee’s rights under sections 7 (essentially the right to organize) and 8(a)(1) (prohibiting employers from interfering with section 7 rights) of the National Labor Relations Act (NLRA).

The NLRB decision left unanswered several questions regarding its interpretation and application, creating uncertainty for both employers and employees regarding the inclusion of confidentiality and non-disparagement clauses in severance agreements. To address these questions and provide some guidance on how the NRLB will enforce the ruling, General Counsel (GC) Jennifer Abruzzo has released Memo 23-05 . The Memo provides instructions to the NLRB’s regional offices on how to issues arising  from the  McLaren Macomb decision. Set forth below is a review of certain of the more important commentary included in the Memo.

Can Severance Agreements Still be Provided to Employees?

Yes. The McLaren Macomb  decision does not prohibit severance agreements. However, as stated in the Memo, “lawful severance agreements may continue to be proffered, maintained, and enforced if they do not have overly broad provisions that affect the rights of employees to engage with one another to improve their lot as employees.”

Are All Confidentiality Provisions Now Prohibited in Severance Agreements?

No. The Memo confirms that “[c]onfidentiality clauses that are narrowly-tailored to restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications may be considered lawful.” Employers should note, however, that confidentiality clauses which have a “chilling effect that precludes employees from assisting others about workplace issues and/or from communicating with the Agency, a union, legal forums, the media or other third parties” are unlawful.

Are All Non-Disparagement Provisions Now Prohibited in Severance Agreements?

Again, no. As stated in the Memo, severance agreements may include “a narrowly-tailored, justified, non-disparagement provision that is 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, may be found lawful.” In other words, a clause which prohibits an employee from making negative, but truthful, statements or from expressing a negative opinion regarding an employer or its products will violate the McLaren Macomb  decision.

Is the Ruling Retroactive?

As noted in our prior blog, NLRB decisions are generally presumed to be retroactive unless retroactivity would result in an injustice or be unfair to the employer. The Memo notes that if the NLRB had determined that there was manifest injustice requiring prospective application, it would have stated so in decision, such that retroactivity does apply to the rulings. The Memo further stated that while an unlawful proffer of a severance agreement may be subject to the six-month statute of limitation noted in our blog, “maintaining and/or enforcing a previously-entered severance agreement with unlawful provisions that restrict the exercise of Section 7 rights continues to be a violation and a charge alleging such beyond the Section 10(b) period would not be time-barred.”

Does a Prohibited Confidentiality or Non-Disparagement Clause Invalidate the Entire Agreement?

In a bit of good news for employers, the Memo states that such clauses which are found to be unlawful will likely not invalidate the entire agreement. The Memo notes that the NLRB “generally make decisions based solely on the unlawful provisions and would seek to have those voided out as opposed to the entire agreement, regardless of whether there is a severability clause or not.”

How Does McLaren Macomb Apply to Supervisors?

As noted in our blog, certain categories of employees are not covered by section 7 of the NLRA, most importantly supervisors and managers with the authority to hire, fire, set pay and discipline workers. While the Memo confirms that supervisors are generally not protected by the NLRA, the NLRA does protect a supervisor who is retaliated against, such as being fired, because he or she is refusing to act on their employer’s behalf in committing an unfair labor practice against employees, in other words, they are refusing to violate the NLRA per their employer’s directives. Accordingly,  it would violative the NLRA for an employer to retaliate against a supervisor who refuses to proffer an unlawfully overbroad severance agreement.

What if the Employee Requests the Prohibited Provision?’

The Memo provides that the identity of the party requesting an overly broad provision is irrelevant – the NLRB “protects public rights that cannot be waived in a manner that prevents future exercise of those rights regardless of who initially raised the issue.”

What Actions Should Employers Take?

In addition to the actions mentioned in our prior blog, employers should not seek to enforce any confidentiality or non-disparagement provisions prohibited by the McLaren Macomb  decision.  The Memo also states that while such action may not cure a technical violation of an unlawful proffer of a severance agreements, employers may seek to remedy such violations by contacting employees subject to severance agreements with overly broad provisions and informing them that such provisions are void and that the employer will not seek to enforce such provisions or pursue any penalties for breaches of them. Such conduct could form the basis for consideration of a merit dismissal if a meritorious charge solely alleging an unlawful proffer is filed by an employee.

Final Thoughts 

As noted in our prior blog, the  McLaren Macomb decision remains subject to appeal, and further direction from the courts may be forthcoming on this issue, which may differ from the decision itself or the interpretations set forth in the Memo.  In addition, the Memo does not have the force of law and is not binding on any party other than the NLRB Regions. Unless and until further action is taken with regard to the decision, the memo is helpful in understanding how the NLRB will most likely apply the McLaren Macomb decision to severance agreements, and employers should refer to the decision and the Memo in enforcing existing, and drafting new, severance agreements and other compliance efforts.

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For further information on the Memo or guidance on drafting or revising your severance agreements, please contact David Paseltiner.

How could you make such a mistake?

It has long been common practice for employers to require a terminated employee to sign a separation agreement as a condition to receiving a severance payment. Such agreements usually include, among other things, the amount and timing of such payments, a general release in favor of the employer (including specific age discrimination waivers if the employee is 40 years of age or older), and non-compete, non-solicitation and confidentiality provisions (or confirm existing such provisions). In addition, such agreements have often required the employee to not disparage the employer and its business and to keep the terms of the settlement confidential (although confidentiality provisions in cases involving resolution of harassment or discrimination claims have been prohibited in some jurisdictions).

                In a recent decision, the National Labor Relations Board (NLRB) has ruled that confidentiality clauses that prohibit an employee from disclosing the terms of her or his severance agreement and clause that prohibit an employee from disparaging their employer as conditions to receipt of a severance payment violate such employee’s rights under sections 7 (essentially the right to organize) and 8(a)(1) (prohibiting employers from interfering with section 7 rights) of the National Labor Relations Act (NLRA). Set forth below is a discussion of this ruling, its applicability, and certain related issues.

Which Employers and Employees are Covered by the Ruling? Which are Not Covered?

                The NLRB’s authority extends to most US private sector employers and this ruling applies to both unionized and non-unionized employees.

Certain categories of employers are not subject to the authority of the NLRB, namely Federal, state and local government agencies (including public schools, libraries and parks), railways and airlines.

In addition, certain categories of employees are not covered by section 7 of the NLRA, most importantly supervisors and managers with the authority to hire, fire, set pay and discipline workers. In addition, independent contractors, agricultural and domestic workers, and anyone employed by a parent or spouse are not covered by the NLRA. As a result, this ruling does not apply to these individuals.

Are All Confidentiality Provisions Now Prohibited in Severance Agreements?

                No. Even if the employee in question is covered by this ruling, the ruling applies only to disclosure of the agreement’s terms and the terms and conditions of the employee’s job (such as wages, hours, health and safety issues, and other matters pertaining to employment). The severance agreement can still prohibit disclosure of trade secrets and other proprietary and confidential information.

Is the Ruling Retroactive?

                The ruling does not specify whether it is to be applied retroactively. NLRB decisions are generally presumed to be retroactive unless retroactivity would result in an injustice or be unfair to the employer. In this case, as the confidentiality and non-disparagement provisions were permitted by two 2020 NLRB decisions, a good case could be made that it would be unfair now to penalize employers who relied on that decision. However, the NLRB normally applies a six-month window to bring violations of the NLRA to the NLRB, and it could apply the decision to a severance agreement containing these clauses which was signed or enforced during this period.

What Actions Should Employers Take?

                First, unless and until the NLRB ruling is reversed (it is subject to appeal) or overruled, employers should not include provisions pertaining to (a) confidentiality of severance agreement terms, (b) confidentiality regarding terms and conditions of employment, or (c) non-disparagement of the employer, in severance agreements being given to employees subject to the NLRA (as described above).

                Second, review general confidentiality provisions in such agreements to ensure that they are not overly broad. Employers are advised to include language in general confidentiality provisions stating that such clauses do not restrict or impede the employee from exercising protected rights (including under section 7 of the NLRA) to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency.

                Third, whether an employee falls into the supervisor or manager category can be a grey area. If there’s any uncertainty with regard to a specific employee, consider whether the confidentiality and non-disparagement clauses described above are essential or can be eliminated.

                Finally, keep in mind when setting the amount of severance being offered that employees covered by this ruling cannot be prohibited from disclosing this amount to other employees. This is not all that critical if your company has a fixed severance plan or program but can be a concern if amounts are set on a case-by-case basis. An employer who gives a generous severance package to one employee may need to be prepared to justify why that package should not be provided to subsequent employees.

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                For further information on this ruling or guidance on drafting or revising your severance agreements, please contact David Paseltiner.