Nondisparagement and Confidentiality Clauses In Severance Agreements Violate NLRA

Just about every single severance agreement I've ever seen in 36 years of law practice have two standard clauses: the former employee cannot disparage the former employer, meaning they can't say anything negative about the company or its employees and frequently to a broader list of entities; and a confidentiality clause prohibiting the former employee from telling anyone about the agreement, frequently prohibiting them from even saying it exists.

Well, the National Labor Relations Board has just ruled that both provisions are illegal under the National Labor Relations Act.

Regarding nondisparagement: 

This far-reaching proscription—which is not even limited to matters regarding past employment with the Respondent— provides no definition of disparagement that cabins that term to its well-established NLRA definition under NLRB v. Electrical Workers Local 1229 (Jefferson Standard Broadcasting Co.), supra, 346 U.S. at 477. Instead, the comprehensive ban would encompass employee conduct regarding any labor issue, dispute, or term and condition of employment of the Respondent. As we explained above, however, employee critique of employer policy pursuant to the clear right under the Act to publicize labor disputes is subject only to the requirement that employees' communications not be so “disloyal, reckless or maliciously untrue as to lose the Act's protection.” Emarco, Inc., 284 NLRB 832, 833 (1987).  

Further, the ban expansively applies to statements not only toward the Respondent but also to “its parents and affiliated entities and their officers, directors, employees, agents and representatives.” The provision further has no temporal limitation but applies “[a]t all times hereafter.” The end result is a sweepingly broad bar that has a clear chilling tendency on the exercise of Section 7 rights by the subject employee. This chilling tendency extends to efforts to assist fellow employees, which would include future cooperation with the Board’s investigation and litigation of unfair labor practices with regard to any matter arising under the NLRA at any time in the future, for fear of violating the severance agreement’s general proscription against disparagement and incurring its very significant sanctions. The same chilling tendency would extend to efforts by furloughed employees to raise or assist complaints about the Respondent with their former coworkers, the Union, the Board, any other government agency, the media, or almost anyone else. In sum, it places a broad restriction on employee protected Section 7 conduct.  We accordingly find that the proffer of the nondisparagement provision violates Section 8(a)(1) of the Act.

Our scrutiny of the confidentiality provision of the severance agreement leads to the same conclusion. The provision broadly prohibits the subject employee from disclosing the terms of the agreement “to any third person.” The employee is thus precluded from disclosing even the existence of an unlawful provision contained in the agreement. This proscription would reasonably tend to coerce the employee from filing an unfair labor practice charge or assisting a Board investigation into the Respondent’s use of the severance agreement, including the nondisparagement provision. Such a broad surrender of Section 7 rights contravenes established public policy that all persons with knowledge of unfair labor practices should be free from coercion in cooperating with the Board. The confidentiality provision has an impermissible chilling tendency on the Section 7 rights of all employees because it bars the subject employee from providing information to the Board concerning the Respondent’s unlawful interference with other employees’ statutory rights. See Metro Networks, supra, 336 NLRB at 67.

Regarding confidentiality:

The provision broadly prohibits the subject employee from disclosing the terms of the agreement “to any third person.”  The employee is thus precluded from disclosing even the existence of an unlawful provision contained in the agreement. This proscription would reasonably tend to coerce the employee from filing an unfair labor practice charge or assisting a Board investigation into the Respondent’s use of the severance agreement, including the nondisparagement provision. Such a broad surrender of Section 7 rights contravenes established public policy that all persons with knowledge of unfair labor practices should be free from coercion in cooperating with the Board.  The confidentiality provision has an impermissible chilling tendency on the Section 7 rights of all employees because it bars the subject employee from providing information to the Board concerning the Respondent’s unlawful interference with other employees’ statutory rights. See Metro Networks, supra, 336 NLRB at 67.

The confidentiality provision would also prohibit the subject employee from discussing the terms of the severance agreement with his former coworkers who could find themselves in a similar predicament facing the decision whether to accept a severance agreement. In this manner, the confidentiality provision impairs the rights of the subject employee’s former coworkers to call upon him for support in comparable circumstances. Additionally encompassed by the confidentiality provision is discussion with the Union concerning the terms of the agreement, or such discussion with a union representing employees where the subject employee may gain subsequent employment, or alternatively seek to participate in organizing, or discussion with future co-workers.  A severance agreement is unlawful if it precludes an employee from assisting coworkers with workplace issues concerning their employer, and from communicating with others, including a union, and the Board, about his employment. Id. Conditioning the benefits under a severance agreement on the forfeiture of statutory rights plainly has a reasonable tendency to interfere with, restrain, or coerce the exercise of those rights unless it is narrowly tailored to respect the range of those rights. Our review of the agreement here plainly shows that not to be the case. We accordingly find that the proffer of the confidentiality provision violates Section 8(a)(1) of the Act. 

So, is this a magic wand? Did such provisions suddenly go poof? No. Management side will fight this decision like cornered rats. Still, keep an eye out for further developments. In the meantime, you might want to file with NLRB if your employer presents you with any such provisions in a proposed severance agreement.

How To Tell If You Were Targeted For Layoff Due To Age

Layoffs seem to come in waves, and I'm seeing more of them right after the holidays, and there have been some big layoff announcements. If another recession kicks in, we'll see even more. Older employees, along with the disabled and pregnant employees, are the most targeted employees in layoffs. There seems to be an assumption that the "old guys" will be retiring soon anyhow so it doesn't matter. It does. Targeting older employees is illegal.

How do you figure out whether you were selected due to your age? Here are some factors to consider:

• Comments: If your boss makes comments about age, that's direct evidence of age discrimination. Referring to older employees as, "geezer," "old man," or "pops," may indicate age discrimination. It can be more subtle. Saying the company wants a "young image," asking questions about your energy level or saying you may not be able to keep up with the new changes can all be evidence of age discrimination.
• Different treatment: If you are selected as one of the employees to be laid off but younger, less qualified employees are kept on, then that is also evidence of age discrimination. Let's say the position requires a certification. You have it but the younger employee is working to get it. You're more qualified. Seniority can also be a measure of your qualifications. If you've been in the position for 20 years with all good reviews and the younger employee has only held the job for a year, that's a good indication that age discrimination is occurring.
• Different options: If you are told you have to take the severance, where younger employees are given the option of stepping down to a lower paying position, then that could also be age discrimination.
• Disparate discipline: Since the company is looking at disciplinary history, if you are suddenly targeted for discipline for picky things that younger employees also do and aren't disciplined for, then that is another sign that you are being targeted due to age.

Sometimes, you're given the option of taking a demotion rather than a layoff. If others are offered this option but the older employees aren't, that could be age discrimination in itself. On the issue of stepping down versus taking the severance package, that's a decision you need to weigh carefully. If your retirement benefit (assuming you work for the rare company that still has one) is measured by your last year or several years' pay, then you may want to go for the severance package if offered. On the other hand, if you aren't vested or can't retire yet and only have a few years left, stepping down may be the best option. This might be a good time to meet with your accountant or a financial planner to discuss the best options for you.

If you think you're being targeted due to your age, talk to an employment lawyer in your state. Sometimes age discrimination can give you leverage to negotiate a better severance package.

Does Your Severance Agreement Have A Gotcha? Penn State Sues Former President For Hiding Sexual Molestation Charges

I see this kind of language in proposed severance agreements all the time. Something to the effect of, "Employee represents that he is unaware of any violations of any law, statute, ordinance or government regulation by Employer, its agents, employees, officers or directors." There are all kinds of problems with this seemingly benign language, as Penn State's former President may be about to find out.

You see, Penn State is countersuing Graham Spanier, who sued them for breach of his severance contract. Their claim is that Spanier knew of the former football coach's sexual misconduct and didn't disclose it. They say he had a duty to disclose. And if he had language in his severance agreement representing he didn't know of any legal violations by any of their employees, they may be right.

If he's in breach of his severance agreement, they may not have to pay the severance, or may get to demand he repay all or part of it.

The more common problem I see with language like this is that the severance agreement was presented after the employee raised issues of discrimination or blew the whistle on some illegal activity. My cure for that is to add to the clause, "that he hasn't already disclosed." That way, if he's disclosed race discrimination, unpaid wages or any other issues, he isn't lying that there were no such issues.

However, if you have any such language in your agreement, you'd better make sure you have disclosed every single legal violation you know of. Otherwise, you could be in trouble.

I'm not sure if Spanier's contract has this language. They seem to be alleging that he defrauded them by not disclosing material information, and that had they known he covered up Sandusky's misdeeds, they wouldn't have entered into the agreement. That's a whole 'nuther kettle of fish. Fraud is tough to prove. If they're trying to negate his contract based on fraud or some duty to disclose, I think they'll have a difficult time.

This case is a cautionary tale for anyone thinking about signing a severance agreement. Read it carefully and make sure you comply. If you can't, or it says something that isn't true, ask that it be changed before you sign.

How Not To Screw Up Your Severance Negotiation: Underbidding

So you've decided to negotiate your own severance package. If you're an experienced negotiator like a salesperson or mediator, then maybe you can handle it without screwing up. But if you aren't, then you may make some big mistakes. I thought I'd talk today about one of the worst mistakes you can make: underbidding.

Let's say you're fired or laid off and you are handed a severance package for 8 weeks of severance. You don't think. You run into HR and say you won't sign unless they give you 12 weeks. Done, they say.

But then you go home and think about it. You realize that you were let go a week after you reported age discrimination. Or you take a look at who else was targeted and it's everyone who had signed a petition to get management to raise wages. You have potential claims, and that means leverage. So you go see an employment lawyer.

Normally I'd tell you that I think you have leverage to ask for more, but you did ask for more, told them what you wanted, and they gave it. Now you've come to me to see if I can ask for even more.

I can tell you right now that this employer is almost certainly not going to negotiate any further with you or me. They gave you what you asked for. As they see it, if they give more, you'll keep asking for more. You underbid. You screwed up.

Or maybe they didn't accept your number, and you go to a lawyer to try to ask for more. Even then, most employers (and their lawyers) won't start a negotiation over what you last asking price was. Underbidding can cost you.

Here's what you should have done:

1. Take the proposed agreement home and read it carefully, and if you don't understand it take it to a lawyer.
2. Think about what potential claims you have against the employer. Did they fail to pay overtime? Discriminate based on age, race, pregnancy, sex, national origin or other protected category? Fire you right after you objected to something they were doing that was illegal? If so, write it down and take it to a lawyer along with the agreement.
3. Don't try to negotiate for yourself if you aren't an experienced negotiator.
4. Don't try to negotiate when you're still in shock from being told you don't have a job, no matter how much experience you have.

If you realize you underbid, then you'll likely have to pursue your legal remedies if you want to take the matter further. Whether that's filing with EEOC or NLRB, suing or filing a wage theft claim, you have to be ready to pass on what they've offered and take your chances with a legal case if you really think you asked for too little.

Only in the most exceptional circumstances, like discovering that they let everyone over 50 go or finding a smoking gun, will you be able to bring the employer back to the table if you underbid.

"He who represents himself has a fool for a client." Abraham Lincoln.

Is My Noncompete Contract Superseded? Which Contract Applies?

This reader question was left on my post Non-Compete Agreements - Top 5 Ways To Get Out of Yours:

Hi Donna, I am in the State of PA and had signed two year non competes to get options grants. I left the company under a voluntary separation agreement and part of it was a 1 year non-compete Agreement. Question is does the latter 1 year non compete supersede the 2 year Agreement. Also the Agreements are broad and cover the entire globe - what if I have not worked in the potion of the globe where I may work for the last two years? 

 The first thing I do when I look at a severance agreement for an employee who signed a noncompete is the clause at the end that probably starts with something like, "This is the entire agreement between the parties . . ." The reason I do that is because whether older agreements are still in effect depends on what this clause says.

If it says that it's the entire agreement between the parties except for the noncompete agreement, then the noncompete in the older agreement probably still applies.

If it says it's the entire agreement between the parties and can't be modified except by a writing signed by both parties, with no other modifier, then the old agreement vanishes. I've seen entire noncompete agreements vanish this way. In your case, you have new obligations that supersede the old ones. But in some cases I've actually told the employee to sign the agreement speedy quick before the employer realized that they just lost their noncompete. Can you say malpractice for the lawyer who drafted that one?

If it says that it's the entire agreement between the parties related to the subject matter of the agreement, then in your case the old one goes away. However, if it's a severance agreement without the noncompete language then the question will be what a court thinks the subject matter of the agreement is. I'd argue that the subject matter of the agreement was the obligations of the employer and employee post-termination and that it's gone. Would a judge agree with me? I don't have a crystal ball.

Of course, you're in Pennsylvania and I'm in Florida, so Pennsylvania lawyers might look at this completely differently. I'd love to hear from some of you in the comments. I'd suggest talking to an employment lawyer in your state before you sign.

 

You Say Let's Talk Severance/Your Employer Hears I Quit (Or, Employees Are From Pluto, Employers Are From Uranus)

As sometimes happens when you've been practicing as long as I have (hint - I may have had a pet with a name ending in -saurus), you find yourself chatting with an opposing counsel with whom you've had many encounters over the years. These conversations can sometimes lead to some frank exchanges. I had one of these conversations a few days ago.

The topic was what it means when an employee says they want to talk about a severance package. He insisted it meant the employee had resigned. I hear this all the time from management-side lawyers, and I understand where they're coming from.

However, my clients never see it that way. I told this fellow attorney-saurus that I've never had a single client who meant they were quitting when they said to their boss or HR that they wanted to discuss severance. My colleague seemed shocked by this. "Then what did they mean?" he asked.

I had to explain that employees who say they want to discuss severance are usually making a cry for help. They've gone to the boss or HR with some dire problem. Maybe they've been sexually harassed or discriminated against. Maybe it's a bullying situation. Sometimes they've blown the whistle and are suffering retaliation. They've reported it and gotten no relief. So they say, "Fine. Let's talk severance."

What they probably mean is, "If you won't help me, you risk losing me as an employee." They're usually hoping that this final cry for help will result in some action being taken. They sometimes mean, "Rather than torture me into making me quit, let's just part ways amicably now." They're still hoping the employer will come to their senses.

I'm not sure why there's such a large communication disconnect between employer and employee on this, but my management-side colleague seemed genuinely surprised by my analysis. So I thought I'd share it.

Employers use any mention of a severance package to get rid of a complaining employee. They'll claim you quit before you can finish your sentence. And guess what? If you quit, you usually don't get severance. To an employer, severance goes to employees who have been laid off or fired with little or no cause. Quitters get squat.

So I'll say this to employers: Listen more carefully. If you like this employee, you may be able to salvage things if you act quickly. Plus, if they've just reported sexual harassment, discrimination or blown the whistle on something illegal, you might have handed them a lawsuit by escorting them quickly to the door.

To employees everywhere, be warned: If you even mention a severance package, your employer will claim you quit. Wait for them to bring it up. Then you might actually get some money to tide you over while you're looking for something else. If you were the victim of discrimination, illegal retaliation or sexual harassment, you might also have leverage to negotiate a better package if the employer fires you for reporting it.

I'm sure there are other things that employees and employers hear differently. Do you have any other examples where employees are from Pluto and employers are from Uranus? I'd love to hear them.

Stand Up For Yourself Without Getting Fired

I thought I'd share with you today an interview I did with TJ Walker, who is an excellent media trainer with a regular internet TV show. We talk about my book, employment contracts, noncompete agreements and how you can negotiate a better severance package with your employer.

Ta da! My first video embed. I'm very excited that this worked. Maybe I'll actually figure out one of these days how to embed some videos I did where I actually appear on the video. . .

Employees: You Have The Right To Say No

I'm constantly surprised by the number of employees who come to me after having signed things their employer shoved in front of them, released claims, accepted transfers or demotions, or even admitted to stealing when they didn't. I ask them, "Why didn't you say no?" They look at me like I've turned into a Martian.

Too many employees don't realize that they do have some rights in the workplace. One major right you have is the ability to just say, "no." That's right. You can say no to your employer.

Does that mean you should say no when you get an assignment you don't like? No. Does it mean you should say no when your supervisor tells you to do something outside your job description? Probably not. Most of the time, saying no will get you slapped with discipline or termination for insubordination. But there are times you should respectfully decline.

Here are some situations where you should definitely exercise the power of "no" at work:

Severance: I suggest that employees never sign a severance agreement the day they get it, especially if they're presented with it when terminated. Instead, tell them you want to review it and take it home. Read it carefully. If you don't understand it, take it to an employee-side employment attorney. You should definitely refuse to sign it if you are releasing claims against the company for minimal dollars, if they are inserting a noncompete provision when you don't already have one, or if you are being told you have to release claims when you're already entitled to severance according to an employment agreement or company severance plan.

Termination papers: You're in your termination meeting. They shove a paper in front of you stating that you've been terminated and every reason in the world why you suck. They demand you sign. Don't do it! Why would you? You don't work for them anymore. They can't make you. What's your upside? If you feel like there's no harm, then sign, "As to receipt only." Make sure you aren't agreeing to what they are saying. You aren't thinking straight, so be very careful.

Resignation: "My employer made me quit." I hear that a lot. How did they do that? Did they hold a gun to your head. Unless you are being offered something substantial in exchange for your resignation (or if the gun scenario really occurs), why would you agree to quit? Make them fire you. At least then you'll probably qualify for unemployment. If you resign, they may say you don't qualify. Some people think it looks better on a resume, but who do you really think you're fooling? Nobody resigns in this economy without having a job lined up unless there's a real problem. That gap in your resume is going to be bad, resignation or no. Instead, if they really want your resignation, get something in exchange for it. Use it to negotiate severance, to get out of a noncompete, or to get something else you really want. You may need help here, so now is probably a good time to talk to an attorney rather than jumping into something.

Admission of a crime: If you're put in a room with Risk Management and told to sign a paper saying you stole something if you want to save your job, don't do it! You're admitting to a crime. Never admit to a crime. First of all, you're fired as soon as you sign. Second, the employer may be entitled to sue you for the value of the item plus two or three times its value, plus attorney's fees and costs. It's a trick. Don't fall for it. Practice these words: "I want to speak with an attorney." Repeat as necessary. By the way, they can't make you stay in that room. Tell them you want to leave. Then leave. If they physically stop you, call 911 or scream for help. Seriously. Then go see a criminal defense attorney.

Demotion or pay cut: If you're given a demotion or pay cut you just can't live with, sometimes it's better to say no and apply for unemployment. If you take the job and can't survive on the money, but will be unable to look for a job while you have the job from hell, then you'll have to quit and probably are disqualified from getting unemployment. There are times it's best to say no.

Promotion: If you're offered a promotion that makes you exempt from overtime, doubles your work, decreases your pay, and the last three guys who held the job died at their desk, say no. Get the details before you accept that promotion. Sometimes, overtime pay means you'll make more and have a better life if you stay where you are.

Release: Severance packages usually come with a release of every claim you ever had or might have against the company. I see some companies that have severance plans requiring severance if the employee is laid off that try to get a release even though you're already entitled to severance. I also see people with employment contracts that entitle them to severance being asked to sign a release in order to get it. Say no. Say it again. Run, don't walk, to an employment lawyer in your state. (Better yet, email them). Why on earth would you release discrimination or other claims when you don't have to? If they want that release, make them give you something you want in exchange.

Transfer: You're being asked to transfer across country in the middle of the school year. Your kids are about to take their SATs, your spouse has a job they love. Say no! At the very least, make sure you get a contract, including that they'll pay your moving expenses, help with getting your spouse and kids situated, and guarantee you a minimum amount of severance if you're fired without cause. Better yet, negotiate that you can only be fired for cause and get a specific term of employment for no less than a year. If they won't put enough guarantees and incentives in writing to make it worth your while, take a pass.

Anything illegal: No job is worth going to jail. And guess who they'll throw under the bus when Johnny Law comes a-callin'? It's you. Say no. Better yet, say no in writing. You might want to look at some whistleblower laws to make sure you're doing what you have to do to protect yourself, or talk to an employment attorney about your rights.

Polygraph: The Employee Polygraph Protection Act prohibits most private employers and potential employers from demanding you take a polygraph, and from firing you if you say no. There are exceptions, but they are few. Polygraphs are not admissible in court because they are not reliable. They can say you're lying when you're not. Say no unless you fall within one of the exceptions. If you committed a crime and you are told you have to take it or be fired, take the firing and go see a criminal defense attorney post haste.

These are just some examples of when it's best to exercise the power of "no" at work. I bet you can think of some more. So go ahead. Say no to your employer.

Why Did the Lawyer Put This in My Severance Agreement?: The Cooperation Clause

This continues my series of posts deconstructing the legal gobbeldy-goop in employment agreements. Today I'll talk about a clause I often see in severance agreements: the cooperation clause. It may look something like this:

Employee agrees to cooperate with Employer in connection with any legal matters, if so requested by the Company, including agreeing to make himself available at the Employer's request to assist with matters requiring the provision of information and/or testimony.

Yikes! My clients never like this and neither do I. And really, what good do most employers think is going to come from having an employee they axed testify on their behalf? My first response is usually to ask that this be taken out of the agreement. However, management-side attorneys love these clauses, so here's what I usually do that will work.

First, I ask for language something like this:

Such cooperation shall be arranged so as not to interfere with Employee's employment and/or business.

That way I don't have to worry about the jerk employer who says the employee has to come in during the key sales meeting, the peak busy time, or their first day at a new job. If the employer wants cooperation, they can arrange it after hours or on a weekend so the employee doesn't get fired from their new job. If they want a deposition, same thing. Depositions can be scheduled to work around times that will get the employee fired from their new job. Without this language, the employer can say, "Tough tookies," when the employee cries foul.

The other language I ask for is that the employee be paid for their time. While they probably can't be paid for their time testifying, I want to make sure my client doesn't become an indentured servant forced to help their former employer respond to complicated discovery requests or submit to endless deposition preparation sessions. Even if it's a deposition, the employee should be compensated for their expenses, such as parking fees, gas mileage, and other out of pocket expenses incurred in this cooperation.

Forcing an ex-employee to work for free probably violates the Fair Labor Standards Act in any event, so even if payment isn't in this clause, an employer who goes too far with their demands might run afoul of the Department of Labor.

Why Did The Lawyer Put This In My Settlement Agreement?: Tax Indemnification

This will continue my series of posts about deconstructing the legalese in employment contracts. This week I'll discuss some language I frequently see in severance or settlement agreements when at least some of the money being paid isn't having taxes withheld. The clause will look something like this:

Employer makes no representation as to the taxability of the amounts paid to Employee. Employee agrees to pay federal or state taxes, if any, which are required by law to be paid by Employee with respect to this settlement. Moreover, Employee agrees to indemnify Employer and hold it harmless from any interest, taxes or penalties assessed against it by any governmental agency as a result of Employee's non-payment of taxes on any amounts paid to Employee or Employee's attorney under the terms of this Agreement.

The reason the employer wants this language is that most employment law settlements are for back wages, future lost wages, or severance, which are wages. Wages must have taxes withheld and the employer has to pay its share of employment taxes on them. If the IRS should come back later and claim more (or all) of it should have been wages, the employer wants the employee to agree they'll pay both the employee's and the employer's share of employment taxes on this.

I'm unusual in the way I request settlement money be paid to clients. I usually ask that the employee's portion be paid as wages. I have a couple reasons for this. First of all, no matter how many times I tell the employee to set aside about 1/3 of the money in a CD that comes due on April 1 so they can pay their taxes, it's too tempting to spend the money. I've had too many people call me crying in April that they can't pay their taxes. Second, if IRS should determine that the money should have been wages, my clients can't afford to pay their employer's share of taxes on top of theirs. It's a risk that I usually don't recommend.

Now, let's go back to this tax clause. I used to not object to it being added as is. If my client asks that some of the money be set aside as something other than wages, they should be willing to take the risk that they got it wrong. (On the other hand, if the employer insists that some portion of it be designated compensatory damages or emotional distress damages so they can save money, I insist they take this language out). I say I used to agree because I actually had one employer, after the fact, argue that this clause meant they could withhold the employee's federal income tax and employment taxes, then not pay them in, plus they said they didn't have to pay in their share of employment taxes on the wages amount.

It's probably an only-in-South-Florida thing, but still, this kind of jerkish behavior means I have to change the language in the future. Here's what I now ask employers to add to this clause:

This provision shall not apply to Employer's obligation to pay in amounts withheld and its share of employment taxes on the amount paid pursuant to paragraph ___.

The blank, of course, is filled with the subparagraph that sets out the amount being paid to the employee as wages.

When the attorney's fees are being paid, I insist they be paid separately because they aren't wages. Under the Civil Rights Tax Fairness Act, which used to be part of the mostly-rejected Civil Rights Tax Relief Act, they are still income to both the client and my firm. However, the client should be able to take an above-the-line deduction on their tax return (whatever the heck that is - ask your accountant) so it comes out as a wash.

Basically, there's no way to structure an employment law settlement so any portion of it isn't taxable, at least that I've ever heard of. There have been efforts to pass the Civil Rights Tax Relief Act for decades, all of which have failed. This law would make emotional distress damages tax-free. If you think it's wrong to tax emotional distress damages, which makes it harder to settle employment cases for both employers and employees, talk to your member of Congress.

In the meantime, expect to see these tax indemnification clauses in your agreements, and beware unscrupulous employers who try to use them to force you to pay their share of taxes.

Why Did The Lawyer Put This In My Contract?: Confidentiality

This will continue my attempt to explain some of the legal mumbo jumbo in your employment contract, and why the lawyers put it there. Today, I'll talk about confidentiality. You may see a sentence or two in your agreement that look something like this:

I promise that I will keep all matters relating to this Agreement confidential and that I will not discuss, disclose or provide information concerning any term of this Agreement to any person or entity, except to my spouse, my attorney, my accountant or tax advisor, the Internal Revenue Service, or pursuant to a subpoena.

This is fairly typical one-sided confidentiality language that your employer's attorneys like to stick into most agreements.

Here's why your employer's lawyer put the confidentiality clause in the agreement: 

It's very simple. They don't want you to tell coworkers about the money you got, or your terms of employment. If they put it in your offer letter or employment agreement, they are trying to keep you from telling colleagues what you make, what benefits you are getting, and whether you have anything cool in the agreement like severance, termination for cause only, or bonuses.

If they put it in your severance agreement, it's because they don't want you to tell your former coworkers that you got severance, how much, if you got any extras like health insurance, and if the company waived your noncompete.

If they put it in your noncompete agreement, they're pretty silly. What's the point of having a noncompete you can't show potential employers? Smart management-side lawyers put in language that you must show the noncompete to potential employers. That way, if you violate it, they can come after the competitor and you. How can they come after a company who can prove you weren't allowed to show it to them and therefore they couldn't have been on notice of it?

Here's what you should ask for:

If your employer wants you to keep the agreement confidential, they should too. Most employers (I'm talking about you, HR departments) leak like sieves. There are no secrets. You'll get blamed for blabbing even if your supervisor or HR is a gossip and can't keep a secret. If the confidentiality provision is mutual, then the company will usually read the Riot Act to anyone who knows about the agreement and threaten them within an inch of their employment if they gossip. I've never had one leak that I know of with a mutual confidentiality clause, but I've seen plenty of leaks with one-sided clauses.

Your employer will tell you that it's in their best interest to keep it confidential, and they have no incentive to tell. True for the company, but not true for a person in the company who likes to play I Have A Secret.

If the provision is in your employment agreement and you aren't in management, your employer might have a problem. The NLRB is taking the position that agreements prohibiting employees from discussing working conditions are a no-no. The National Labor Relations Act, which is what NLRB handles, doesn't cover supervisors, so the company can still get away with this language once you are in management.

Watch out for damages

If the provision is in your severance agreement, they'll try to stick in some heinous penalty if you violate, with no similar provision for themselves (because, of course, they'd never violate confidentiality). They'll say if you violate you must return all of your severance, or that you have to pay liquidated damages of something like $5000. Don't agree to that if you can help it. I actually sat through a witness deposition of a person who wasn't testifying the way the employer would like, so they asked her if she'd told anyone about her severance agreement. She admitted she'd told her mom. The lawyers indicated that she'd violated her confidentiality agreement and they would be coming after her. Can you say witness tampering?

Anyhow, it's tempting to tell immediate family members, fiances, domestic partners or someone else who isn't included in the language about who you can tell. If you violate the agreement, let the employer prove they were damaged. I'd like to see them prove they were damaged when you told your dad.

If you really can't get them to budge on the liquidated damages and can't afford to tell them to go pound sand, then think about who you can't resist telling and make sure they're on the list. If you're going to tell your fiance or domestic partner, list them. It's way tempting to hurt someone after a breakup by calling the ex-employer and telling them you know everything, so make sure you zip it if you aren't allowed to tell. If the employer agrees to include them, the employer will want to include language that you'll tell them about the confidentiality and you'll be liable if they breach, so be careful who you tell.

It's tempting to tell people how you got a great deal, how much more you make than that jerk over in the corner, or how much they paid you when you left. That's why the company put a confidentiality provision in your agreement. Don't give into temptation once you agree to confidentiality. Your former employer will very possibly come after you if you blab.

My Employer Says I Have To Resign. What Should I Do?

Suzanne Lucas, the not-at-all-evil Evil HR Lady at CBS Money Watch, wrote an interesting piece about being forced to resign, and I wanted to talk some more about this important issue here. I get this issue all the time. People come to me and say, “I was forced to resign.” Huh? How did the employer do that? Gun to head? Torture devices? Kidnapped loved one? Because your employer can’t make you quit. Quitting is entirely, 100%, up to you.

Just because your boss or HR comes to you and says you have to resign, doesn’t mean you should. My usual advice is never, ever resign unless you have another job lined up or the company offers you an incentive to resign that makes it worth your while.

Suzanne Lucas says you should ask these questions/say the following before resigning:

• How much severance will you give me in exchange for my resignation?
• If I resign, will you oppose unemployment?
• Why do you want me to resign?
• What will you say when you are called for a reference?
• I will take this and have it reviewed by my attorney before signing.
• I need this in writing.
• What will be my official "reason for termination" be in your HR system as well as my paper file?

I agree 100%. You need to weigh your options carefully before agreeing to resign. Now is the time to negotiate. If they want you gone, let them pay you to go away. Otherwise, make them fire you. You need to consider the upsides and downsides to resigning versus being fired. Here are some things to consider.

Why You Shouldn’t Quit

You haven’t complained about illegal harassment or discrimination that occurred: It may be a bit late in the game, but if you didn’t follow the company’s written policy on reporting harassment based on race, age, sex, religion, national origin, disability, etc. then you may lose potential claims against the employer. Now is the time to put together your formal, written complaint of discrimination and harassment. Submit it to HR as soon after the meeting where they asked you to resign as you can. If you think the resignation request is being pushed by your harasser, say so. Tell them how others of a different race, age, sex, religion, or whatever your protected category is were treated differently. Tell them that those others are not being asked to resign. Ask them to do a prompt investigation. Sometimes, they really don’t know about the discrimination and reporting it might stop the termination process in its tracks.

They aren’t offering anything: If they don’t offer severance or some other monetary incentive, why would you quit? Don’t make it easy on them. If they want you out of there, they should offer something, in writing.

You might lose your right to unemployment benefits: Some unscrupulous employers use the resignation as an excuse to claim you aren’t entitled to unemployment. It could be your word against theirs if you don’t properly document that you were forced to resign.

They want you to sign something right away: If the employer is shoving something in front of you and demanding you sign it, consider that a red flag. They’re trying to trick you. Don’t sign anything you don’t understand or are too distraught to think about clearly. Tell them you need time to think about it. Take it to an employee-side employment lawyer if there’s anything in it you don’t fully understand.

You have claims against the company: If you think you have a discrimination, whistleblower, worker’s compensation retaliation, breach of contract or other claim against the employer, you may have leverage to negotiate a better exit package. Don’t sign a release of claims without fully exploring your options.

You aren’t fooling anyone: Some people think a resignation looks better on a resume. Maybe. But if you resign and are then unemployed for months or years, who do you think you’re fooling. Nobody in their right mind quits without having another job in this economy. HR people aren’t (mostly) dumb, so they will know something happened that prompted your resignation.

Why You Should Quit

Great severance package: If you are offered a severance package that will tide you over sufficiently when you’re looking for another job, then you might want to take the deal. Make sure you aren’t also signing away your right to work for a competitor, your pension, or something else of value. Take it to a lawyer to be sure.

Won’t challenge unemployment: In most states, the mere promise that you’ll get unemployment without a hassle isn’t much incentive. Unemployment is usually a fraction of what you were making. However, if you think they might have a basis to successfully challenge your unemployment, then you might consider the resignation as long as they make the promise about unemployment in writing.

You have an alternative: If you have a job offer you’ve been considering, have a startup company you want to spend more time on, or think it might be time to retire, then a forced resignation might help you make a smooth transition. Make sure they agree they won’t tell potential employers or customers anything other than that you left to pursue other options.

If your employer is asking you to resign, you have some power, as Suzanne Lucas points out in her excellent article. Now is the time to explore your options, talk to a lawyer, call your union rep, and read everything carefully. You may have more leverage to negotiate in this situation than you think. Good luck!