Overly Broad Confidentiality Clause Makes Non-Union Employer Liable Under The National Labor Relations Act

Overly Broad Confidentiality Clause Makes Non-Union Employer Liable Under The National Labor Relations Act

Executive Summary: A non-union employer who imposes an overly broad confidentiality policy restricting employees’ rights to discuss the terms and conditions of employment may violate the National Labor Relations Act
National Land Services, Inc. v. National Labor Relations Board¸ 560 F. 3d 36 (1st Cir. 2009)

This is an important case in which the National Labor Relations Board (NLRB) found that a non-union employer violated section 8(a0(1) of the National Labor Relations Act (“NLRA”) by maintaining an overly broad confidentiality policy and by discharging an employee for violating it.

The employer was a temporary employment agency that placed employees in the natural gas industry. Its standard employment agreement stated,

Employee … understands that the terms of this employment,
including compensation, are confidential to Employee and the
[Employer]. Disclosure of these terms to other parties may
constitute grounds for dismissal.

The employee had concerns about his job which included delays in receiving pay checks and a reduction in expense reimbursement rates. He expressed those concerns to the company with whom he was placed, the employer learned about this and discharged the employee for violating the confidentiality terms of the contract.

Section 7 of the NLRA guarantees employees the right to “self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” Section 7 has been held to include the right of all employees to communicate with one another regarding self-organization at the jobsite. As the Supreme Court of the United States has said, ‘[O]rganization rights are not viable in a vacuum; their effectiveness depends in some measure on the ability of employees to learn the advantages and disadvantages of organization from others.” Cent. Hardware Co. v. NLRB, 407 U.S. 539, 543 (1972).

Section 7 rights are protected by Section 8(a)(1) of the NLRA which prohibits employers from interfering with, restraining, or coercing employees in the exercise of the rights guaranteed in” section 7 of the NLRA. Section 8(a)(1) has been read to bar employers from interfering with employees’ right to discuss the terms and conditions of employment with others under section 7. Beth Israel Hosp. v. NLRB¸ 437 U.S. 483, 491 (1978). An employer violates Section 8(a)(1) when it maintains a work rule or contract term that would “reasonably tend to chill employees in their exercise of the section 7 rights.” This is so even when the rule is not enforced if the rule explicitly restricts communications protected by section 7 or if an employee would reasonably construe the work rule to prohibit communications or other activities protected by section 7.

The court held that the language of the confidentiality clause could be construed to forbid discussion among employees of the terms and conditions of employee, and it therefore violated section 8(a)(1) even though the communication in question was not with another employee of the company.

The employer attempted to defend its actions on the basis that it had another legitimate reason for terminating the employee (insubordination). The NLRB and the court rejected this defense because in cases where the employer’s work rule is invalid, discharge for violating that rule is also invalid, regardless of other reasons. According to long standing precedent, the NLRB has held that “[t]he fact that one reason for [discipline] was lawful in no way diminishes the fact that the other reason was unlawful.”

The NLRB’s remedy was broad. The employer was required to notify all current and former employees hired under contracts that contained the confidentiality clause of its decision, the employee was ordered reinstated and damages for any loss of earnings or other benefits were awarded and all references to the discharge were to be removed from his employment record.

If your business includes confidentiality clauses in its employment agreements or employee manual, you may consider revising your policy to make sure that it does not run afoul of the NLRA and section 8. If you have questions about this or other employment issues, please feel free to call Tom Barron at 856 642 6445 or at tbarron@barpostlaw.com

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