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Commercial Litigation

Getting into deep water over confidentiality policies—NLRB torpedoes non-unionized workplace non-disclosure policies

July 10, 2014

Commercial Litigation

Getting into deep water over confidentiality policies—NLRB torpedoes non-unionized workplace non-disclosure policies

July 10, 2014

Back to Fish's Litigation Blog

 

Think that the National Labor Relations Act (“NLRA”) only applies to unionized workforces?  Guess again, partner.  In recent years, the National Labor Relations Board (“NLRB”) has moved aggressively to expand the reach and application of the NLRA to non-unionized workplaces.  One example of these efforts is the NLRB’s attempt to strike down certain (i) policies found in non-unionized company handbooks and (ii) provisions included in employment agreements on the basis that such policies and provisions impair the employees’ right to engage in concerted activity.

Many employers implement confidentiality policies that explicitly prohibit employees from discussing their salaries or bonuses.  There are, of course, good reasons for such policies.  Open discussion of salaries and bonuses can often result in serious morale problems, and employees often fail to appreciate the legitimate reasons for salary differences. In a recent decision, however, the NLRB has made it clear that, in its view, such policies interfere with an employee’s right to engage in concerted activity.  And this decision applies to all employees, regardless of whether or not they are represented by a union.

Specifically, in Flex Frac Logistics LLC v. NLRB, the Fifth Circuit—a federal appeals court not known for issuing NLRB-favorable rulings—upheld a decision by the NLRB holding that a company policy forbidding employees from sharing “Confidential Information”—defined to include “financial information, including costs” and “personnel information”—with persons outside the company was a violation of the NLRA.

The NLRA makes it an “unfair labor practice” for an employer to “interfere with, restrain, or coerce employees in the exercise of rights” including “self-organization; forming, joining, and assisting labor organizations; collective bargaining; and engaging ‘in other converted activities for the purpose of collective bargaining or other mutual aid or protection.’”  Generally speaking, the NLRB takes the position that work rules prohibiting discussions of wage information between employees violate the NLRA.  Rules that do not explicitly prohibit such discussions are considered unfair labor practices as well if: “(1) employees would reasonably construe the language to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of Section 7 rights.”

The Flex Frac case involved a non-union trucking company based in Fort Worth, Texas.  Each Flex Frac employee is required to sign a document which includes a confidentiality clause.  An employee filed a charge with the NLRB after the company fired her for violating the confidentiality clause.  After the NLRB issued a complaint, an administrative law judge found that although there was no reference to wages or other specific terms and conditions of employment in the confidentiality clause, the clause violated Section 8(a)(1) of the NLRA because it was overly broad and contained language employees could reasonably interpret as restricting the exercise of their Section 7 rights.

The Fifth Circuit agreed with the NLRB’s decision that the confidentiality clause’s references to “financial information, including costs” and “personnel information” could be read to cover discussions of wage information.  If employees could reasonably construe the rule to cover protected activity, the rule is an unfair labor practice, regardless of whether any employees actually interpreted it in that manner or whether the employer ever applied the rule against protected activity.

The NLRB is not the only organization in town seeking to restrict an employer’s right to prohibit discussions about compensation.  Indeed, some states have passed their own statutes prohibiting employers from placing restrictions on employee discussions regarding wages and compensation. For example, Michigan’s Payment of Wages and Fringe Benefits Act prohibits an employer from discharging, formally disciplining or otherwise discriminating against an employee who discloses the amount of the his own wages.  Similarly, New Jersey recently amended its state discrimination statute to prohibit employers from retaliating against employees who request information about or discuss their coworkers’ salary, benefits or other job information for the purpose of uncovering potential pay discrimination.  Employers with overly broad or ambiguous confidentiality policies, therefore, not only face the risk of potential backlash from the NLRB but may also be exposed to state law liability.

In light of this decision, it makes sense for employers to review confidentiality policies and provisions and consider revising them.  Specifically, employers should revisit and consider revising their trade secret and confidentiality policies to ensure that they cannot be read to prohibit wage discussions between employees.  General terms, such as “personnel information” or “costs” without further elaboration should be avoided.  Employers can add specific policies that make clear that wage discussions between employees are not prohibited.  The Flex Frac decision does not mean that employers cannot implement policies prohibiting employees from disclosing information regarding other employees’ wages that they have access to as a result of their position in the company (for example, employees working in the personnel department), and employers are still permitted to restrict the use and disclosure of other types of confidential information developed and/or used in the company’s business, including information about the identity of customers and the amount of a company’s sales.

 

 

 

 

 

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