The U.S. Department of Labor (DOL) and the Office of the Solicitor (SOL) recently published a report on employment contract provisions that they found are “discouraging workers from exercising their rights under worker protection laws.” The DOL and SOL state that in “many cases these provisions clearly violate the law.” The report lists the following seven types of “especially concerning” contractual provisions:
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Contractual provisions requiring workers to waive statutory protections
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Contractual provisions that purport to require employees to agree that they are independent contractors
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Indemnification-type provisions and related counterclaims purporting to shift liability for legal violations to workers or other entities
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“Loser-pays” provisions attempting to require employees to pay the employer’s attorney’s fees and costs if the employees do not prevail in litigation or arbitration
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“Stay-or-pay” provisions, including some training repayment assistance provisions, that purport to require workers to pay damages to their employer for leaving a contract early
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Confidentiality, non-disclosure, and non-disparagement provisions
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Company policies that purport to require workers to report safety concerns to their employer before contacting any government agencies
The first bullet point – provisions that require workers to waive statutory protections – is discussed in more detail in the report. It seems the provisions the DOL and SOL find problematic are ones that require workers to waive claims, such as Fair Labor Standards Act (FLSA) claims, that can’t legally be waived by a private agreement. The DOL and SOL noted problematic provisions related to the FLSA, such as requiring employees to agree to a shortened statute of limitations for FLSA claims or forego recovering liquidated damages.
Moving forward, employers should make sure that any agreements waiving legal claims are waiving claims that can legally be waived. Consulting and Enterprise members can have their agreements reviewed for compliance by an Employers Council attorney. All members can access our state-specific waiver and release templates, which are as follows: Arizona, California, Colorado, Idaho, New Mexico, Utah, and Wyoming.
Many legal agreements have “loser-pays” provisions. The DOL and SOL note that some laws, such as the FLSA, have a “one-way fee shifting provision” where the employer cannot recover attorney’s fees from the worker. The concerns discussed by the DOL and SOL are related to provisions that have fee shifting, which is not permitted under a particular law.
Regarding the use of confidentiality, non-disclosure, and non-disparagement provisions, the report indicates the concern is about provisions that are overly broad and prevent workers from discussing working conditions, employment-related issues, communicating with government agencies without notifying their employer, or making statements about the employer without the employer’s permission. The DOL and SOL state that “these provisions have a chilling effect on workers’ ability and willingness to communicate with the Department or otherwise exercise their legal rights under statutes such as the FLSA and OSHA.”
The National Labor Relations Act (NLRA) gives employees, even those not in a union, the right to talk about the terms and conditions of work, which includes things such as wages, working conditions, and employer’s policies and practices. It seems the DOL and SOL guidance is concerned about contract provisions that violate the NLRA. Employers should note that in 2023, the National Labor Relations Board (NLRB), the agency that enforces the NLRA, issued a decision that limits what can be included in non-disparagement and confidentiality clauses. If you are an Employers Council member, you can access the template agreements mentioned earlier in this article that have confidentiality and non-disparagement clauses that are in accordance with the NLRB decision.
The report provides more information on the contractual provisions that the DOL and SOL find chilling of workers’ rights. The report doesn’t carry the force of law, and it’s not clear whether a court would agree with it. The report, though, does indicate how the DOL, which enforces many laws and has the power to sue employers, views certain provisions and indicates the agency finds them problematic. Employers, therefore, should review their agreements and make sure they don’t have provisions or language that the report indicates are problematic and potentially unlawful. If you are a Consulting or Enterprise Employers Council member, we can help review your agreements. Contact us at info@employerscouncil.org.
Erika Paulus is an attorney for Employers Council.