In the last few years, the National Labor Relations Board (NLRB) has been declaring unenforceable one confidentiality policy after another, forcing employers to balance their need to protect their confidential information and trade secrets against the right of employees to freely discuss the terms of their employment. So, how should a business draft its confidentiality policy so that it serves its purpose, but does not land the company in hot water with the NLRB? Last week’s Fifth Circuit Court of Appeals‘ decision in Flex Frac Logistics, L.L.C., et al. v. National Labor Relations Board provides some useful guidance.
In this case, the confidentiality provision in question prohibited Flex Frac’s employees from sharing “confidential information” outside the organization. Such “confidential information” included, but was not limited to, the company’s marketing processes, plans and ideas, financial information, costs, prices, business plans, and “personnel information and documents.”
When Kathy Lopez, Flex Frac’s employee was fired, she filed a charge with the NLRB, prompting the Acting General Counsel for the Board to file a complaint, alleging, inter alia, that Flex Frac promulgated and maintained a rule prohibiting employees from discussing employee wages in violation of Section 8(a)(1) of the National Labor Relations Act (NLRA). The administrative law judge found that the confidentiality clause violated Section 8(a)(1) because it was overly broad and contained language employees could reasonably interpret as restricting their exercise of their Section 7 rights. In a split decision, the NLRB affirmed. Flex Frac appealed, and the Fifth Circuit affirmed as well.
The Court of Appeals explained that under Section 8(a)(1) of the NLRA, it is an “unfair labor practice for an employer . . . to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 157 of this title.” Such rights include self-organization; forming, joining, and assisting labor organizations; collective bargaining; and engaging “in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” 28 U.S.C. § 157. Thus, a “workplace rule that forbids the discussion of confidential wage information between employees . . . patently violates Section 8(a)(1).”
Even if the workplace rule or policy does not expressly prohibit discussion of such information, it may still violate Section 8(a)(1) if the employees would reasonably construe the language of the policy to prohibit Section 7 activity. Because the confidentiality clause at question in Flex Frac prohibited discussion of all “personnel information” and did not create an exception for discussion of wages, according to the Fifth Circuit, employees could reasonably construe its language as prohibition against discussion of wages or other terms and conditions of employment.
Importantly, the Fifth Circuit differentiated the Flex Frac policy from the confidentiality clauses upheld in the following cases:
- Policy prohibited disclosure of “hotel-private information to employees or other individuals or entities that are not authorized to receive that information,” but did not define “hotel-private information.” Held not to violate the NLRA because employees would reasonably interpret it to protect customers’ information and not interfere with discussion of their wages. Lafayette Park Hotel, K-Mart, 330 N.L.R.B. 263 (1999).
- Policy stated that “Company business and documents are confidential. Disclosure of such information is prohibited.” Held not to violate the NLRA for the same reason. Lafayette Park Hotel, K-Mart, 330 N.L.R.B. 263 (1999).
- Policy prohibited employees from disclosing “proprietary information . . . includ[ing] . . . customer and employee information, includ[ing] organizational charts and databases [and] financial information.” Held not to violate the NLRA because “employee information” was listed as an example of “intellectual property,” and would be reasonably interpreted by employees not to include information related to the terms and conditions of their employment or their wages since those are not considered “intellectual property.” In re Mediaone of Greater Fla., Inc., 340 N.L.R.B. 277 (2003).
Unlike the confidentiality policies in these cases, the Flex Frac policy prohibited disclosure of specifically “personnel information” and failed to clarify that such information did not include “wages.” Thus, the company employees could reasonably interpret “personnel information” to include the terms and conditions of the their employment. The Fifth Circuit noted in a footnote, however, that the NLRB‘s order did not impair the majority of the company’s confidentiality policy and nothing prevented Flex Frac from redrafting its policy to require confidentiality for employee-specific information such as social security numbers, medical records, background criminal checks, drugs test, or other similar information.
The Flex Frac opinion was issued a little over a month after NLRB struck down another employer’s confidentiality policy that prohibited disclosure of “personal or financial information.” The NLRB in MCPc, Inc. v. Jason Galanter, 360 NLRB 39 (2014) found that the employer violated Section 8(a)(1) by maintaining an overly broad confidentiality rule in its employee handbook stating that “dissemination of confidential information within [the company], such as personal or financial information, etc., will subject the responsible employee to disciplinary action or possible termination.” The Board found that employees would reasonably construe this rule to prohibit discussion of wages or other terms and conditions of employment with their coworkers—activity protected by Section 7.
BOTTOM LINE: In light of the above NLRB decisions and the Flex Frac opinion, employers should review their confidentiality policies to ensure that they are drafted to encompass only trade secrets and other confidential and proprietary information rather than information that could relate to wages and other terms and conditions of employment.
For assistance in drafting or auditing your company’s confidentiality policy, contact Leiza Dolghih.