Employer Confidentiality Policies May Violate Law

Jennifer L. Parent
Director, Litigation Department & Chair Business Litigation Practice Group
Published: Greater Concord Chamber of Commerce's newsletter
May 11, 2012

A decision of the National Labor Relations Board (“Board”) will affect union and non-union employers alike. In NLRB v. Northeast Land Services, the First Circuit Court of Appeals, which covers New Hampshire, affirmed the Board’s decision that an employer’s confidentiality policy unlawfully limited an employee’s right to discuss the terms and conditions of employment in violation of the National Labor Relations Act (“the Act”). Employers should be familiar with this area of the law and review their policies to ensure they are in compliance.

Northeast Land Services, Ltd. (“NLS”), a temporary employment agency, supplied workers to companies in the natural gas and telecommunications industries. Jamison Dupuy, an employee of NLS, was placed with the company El Paso.  During his employment at NLS, Dupuy complained about repeated delays in receiving his paycheck and reimbursement of expenses and communicated these concerns directly to El Paso. Shortly thereafter, NLS terminated Dupuy’s employment.

NLS had required Dupuy to sign upon hire a temporary employment contract that contained a confidentiality provision. It provided, in pertinent part:

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

At termination, NLS had told Dupuy that he had “not lived up to `his` end of the bargain with `NLS`.” Testimony confirmed the comment was a reference to Dupuy having violated the confidentiality provision by communicating complaints to El Paso.

Dupuy filed an unfair labor practice charge, alleging that NLS violated section 8(a)(1) of the Act by maintaining and enforcing an unlawful confidentiality clause in its employment contract that discouraged employees from engaging in protected concerted activities. Under Section 8, an employer shall not “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in” Section 7. Section 7 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.”

On appeal, the First Circuit affirmed the Board’s finding that the confidentiality provision was unlawful. The employer had argued that the provision did not prevent employees from talking among themselves and, in any event, it did not enforce the clause as to protected union activity. Rejecting that argument, the Court confirmed that an employer violates Section 8(a)(1) when it maintains an overbroad policy or rule that would have a chilling effect an employee’s exercise of such rights. The Court also rejected an argument for a balancing test to consider legitimate business reasons for the confidentiality provision.

Employers – unionized and non-unioned – need to be familiar with the prohibitions under the Act and to review all policies to ensure that they do not chill concerted activity in violation of the law. This includes reviewing general company policies as well as policies concerning confidentiality, communications, and social media. Even if the employer never enforces the rule in a manner prohibited by law, the Board is finding overbroad policies unlawful and a violation of the law on the basis that employees would believe that they restrict conduct protected as concerted activity. Employers should also be careful when disciplining or discharging employees for conduct involving communications to ensure that the conduct does not involve protected concerted activity.