First Circuit Finds Confidentiality Clause Violates National Labor Relations Act
A recent decision by the First Circuit Court of Appeals interpreting the National Labor Relations Act (NLRA) provides a cautionary note for unionized and non-unionized employers alike.
It is an unfair labor practice under the NLRA to interfere with employees' rights to discuss the terms and conditions of their employment (including compensation) with other employees or union representatives. In the recent case the employer, a temporary staffing company, required employees to execute an agreement containing the following provision: "Employee understands that the terms and conditions of this employment, including compensation, are confidential to Employee and Employer. Disclosure of these terms to other parties may constitute grounds for dismissal."
The employer terminated the employee - who did not belong to a union - after it discovered that the employee had disclosed (among other things) his rate of pay to the employer's client where the employee was staffed. The employee then filed an unfair labor practice charge with the National Labor Relations Board. The employer argued that it did not violate the NLRA because (i) the contract did not expressly prohibit employees from discussing terms of employment among themselves; and (ii) the agreement was not enforced in the face of union activity.
The First Circuit disagreed. Although it agreed that employers can legitimately prohibit employees from discussing compensation with third parties when such information has competitive value, it nevertheless held that because employees could reasonably construe the contract clause to prohibit the exercise of their NLRA rights, the clause was unlawful. The Court thus concluded that "any discharge pursuant to an unlawful rule is itself unlawful."
The Court noted that the clause in question could have been more narrowly drafted to both protect both the employees' and the employer's interests. In other words, the clause could have more clearly delineated what information an employee could or could not share, and with whom. Accordingly, we recommend that clients (1) review confidentiality agreements and policies to ensure they are not overbroad; and (2) seek further guidance before disciplining an employee for violating such confidentiality requirements.
