The NLRB and Confidentiality Clauses

On January 28, 2013, an NLRB Administrative Law Judge (“ALJ”) found that even though an employer’s overly broad confidentiality clause violated Section 8(a)(1) of the National Labor Relations Act (“NLRA”), the employee’s termination did not because she was not engaged in protected activity.  This is an important distinction because many employers have very far reaching and ambiguous confidentiality and non disclosure agreements with their employees.  This decision seems to indicate that an overly broad confidentiality rule will not always lead to sanctions levied by the NLRB against an over-zealous employer.

The case, Flex Frac Logistics LLC and Silver Eagle Logistics, LLC (Joint Employers), Case No. 16-CA-27978, was on remand from the NLRB for further factual findings related to the employee’s termination and whether the employee’s discussions constituted protected activity.  On September 12, 2012, the NLRB had found that the employer’s confidentiality provision violated the NLRA because it was “broadly written with sweeping, nonexhaustive categories that encompass nearly any information related to [the employer],” including the reasonable interpretation that it prohibited employees from discussing wages or other terms and conditions of employment. 358 NLRB No. 127.  As the NLRB stated, “Board law is settled that ambiguous employer rules – rules that reasonably could be read to have a coercive meaning – are construed against the employer.”  Id.  Whether the employer intended such a consequence has no bearing on the analysis.

In Flex Frac, the employer acknowledged that the employee was terminated pursuant to the confidentiality agreement, but that the termination was based on the employee disclosure of sensitive customer contract rates as opposed to the employee’s discussions related to wages.  The ALJ agreed.  In making the findings that the employee was not engaged in protected activity, the ALJ relied on the NLRB’s decision in Continental Group, 357 NLRB No. 39, slip op. at 2 (2011) for the proposition that discipline imposed pursuant to an unlawfully overbroad rule violates the NLRA when the employee has engaged in protected conduct or has engaged in conduct that otherwise implicates the concerns underlying Section 7 of the Act.  The ALJ further stated that “an employer will avoid discipline imposed pursuant to an overly broad rule if it can establish that the employee’s conduct actually interfered with the employee’s own work or that of other employees or otherwise actually interfered with the employer’s operations.”  The Flex Frac employer provided evidence that the employee had disclosed confidential customer information and had disrupted and interfered with the work of two different departments.  The ALJ found this evidence to be credible.

The Flex Frac decision lies in opposition to another NLRB ALJ’s recent decision in Quicken Loans, Inc. (Case No. 28-CA-75857)(January 8, 2013).  In Quicken Loans, the ALJ ruled that two provisions in an employment agreement signed by all Quicken Loans, Inc.’s mortgage bankers (confidentiality and nondisparagement) were overly broad and unlawfully hindered employees’ rights to engage in protected concerted activity as in the Flex Flac case.  Quicken Loans had filed suit against several former employees for violating the noncompete sections of their agreements.  The employees, in turn, sought a ruling from the NLRB regarding the propriety of the terms of the agreements.

The ALJ reviewed these provisions to determine whether the rules would reasonably tend to chill employees in the exercise of their Section 7 rights.  The ALJ found that the provisions would not allow employees to discuss wages and other benefits they receive with their co-workers or union representatives.  Further the ALJ found that employees are allowed to criticize their employers within certain limits and that the effect of the non-disparagement provision would be to prohibit such lawful activity.

Flex Frac and Quicken Loans remind us that the NLRB and its Administrative Law Judges are grappling with the Board’s activist decisions.  There will continue to be disparate rulings that will leave employers with questions regarding their workplace policies, procedures and conduct.  In the meantime, it is a good practice to review employer policies related to confidentiality, nondisclosure and at-will provisions to determine whether they could “reasonably” be read to have a coercive meaning.

For more information or assistance, contact employment attorney Louis C. Klein in our Los Angeles office at lklein@foleymansfield.com.

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