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Confidentiality Provisions of Employee Agreements May Violate the National Labor Relations Act

Two recent National Labor Relations Board (“NLRB”) cases demonstrate the NLRB’s willingness to interpret seemingly common sense, business-focused terms of employer confidentiality agreements as unfair restraints on employee rights. Specifically, these cases have found that such agreements infringe on an employee’s right under Section 7 of the National Labor Relations Act (the “Act”) to discuss the terms and condition of his or her employment. For businesses, failing to keep employee policies compliant with the constantly changing view of the NLRB and its Administrative Law Judges can be a costly, but avoidable, endeavor.
In the first case, MUSE School CA, the employer maintained a policy that defined “confidential information” as any “material or information … that is not generally known to the general public or business competitors … ” and prevented employees from disclosing such information without employer approval. The Administrative Law Judge hearing the case determined that the language could be reasonably interpreted to include a prohibition on an employee discussing his or her wages. Therefore, the confidentiality agreement unlawfully infringed an employee’s right to discuss the terms and conditions of his or her employment with fellow employees or, perhaps, union organizers.
In the second case, Tiffany and Co., a different Administrative Law Judge also found similar provisions unlawful. The company confidentiality agreement required employees to obtain employer approval to: 1) disclose non-company names, addresses, and other contact information (i.e. customer information); 2) respond to media requests; and 3) disclose information concerning wages, benefits or other terms of employment. As in MUSE SCHOOL CA, the Administrative Law Judge initially found that each of these provisions violated Section 7 of the Act because each provision interfered with an employee’s right to openly discuss the terms and conditions of his or her employment. However, Tiffany and Co.’s policy contained a “savings clause” stating that the policy did not apply to “employees who speak … with fellow employees or others about their wages … in the exercise of their statutory rights … under the National Labor Relations Act.” As such, the Administrative Law Judge ultimately concluded that only the first two prohibitions violated the Act.
These cases show how common sense employer policies may not stand up to NLRB scrutiny. Taken together with recent NLRB cases discussing the legality of other employer handbook provisions, like those relating to the use of social media, it is important for employers to take the time to review their handbooks and ensure that their policies are properly drafted and maintained. When a company’s employee handbook piques the interest of the NLRB, the company may have to pay attorney’s fees and the costs of changing and reissuing its employee handbook to its employees. However, if the NLRB finds that an employee was terminated as a result of a policy that violates the Act, the company, in addition, will be ordered to pay the terminated employee for all lost wages and benefits, accruing from the date of termination until the date the case is finally resolved, which, given the pace of proceedings, could be years later. Therefore, letting company policies linger without review can be a costly mistake.
For further information on labor and employment please contact Philip S. Mortensen.