Know The Law: Employer Confidentiality Policies May Violate Law

Jennifer L. Parent
Director, Litigation Department & Chair Business Litigation Practice Group
Published: Union Leader
January 12, 2012

Jim, Vice President of Acme Corporation, has decided it is time for a company policy on employee communications outside the workplace. Jim has seen too many news reports about employees’ comments on facebook and blogs and he wants to put in place a confidentiality policy to control or limit what is acceptable for employees to communicate.  Are there any legal problems for Jim in drafting such a policy?

A recent 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 (NLRA).  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 was employed by NLS as a right-of-way agent for NLS client El Paso Energy.  During his employment, Dupuy complained to NLS about repeated delays in receiving his paycheck.  He also complained about reimbursement of expenses and tried to get the procedures changes, which NLS denied claiming El Paso would not agree to any alternative expense arrangements.

In early October, Dupuy contacted the client El Paso directly and informed them that his cell phone was not working. He also inquired whether he could work for El Paso through a different agency because NLS was not paying him in a timely manner. Dupuy later raised an additional concern about his daily reimbursement rate for the use of his personal computer while working for El Paso and included El Paso on email correspondence he had with NLS on this issue. Shortly thereafter, NLS informed Dupuy that his employment was terminated.

Upon Dupuy’s hire, NLS had required him to sign a temporary employment contract.  That employment contract contained a confidentiality provision that 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 the time of his termination, an NLS manager told Dupuy that he had “not lived up to `his` end of the bargain with `NLS`.” That manager later testified that his comment was a reference to the confidentiality provision that required Dupuy not to disclose the terms of his employment with outside parties. The NLS manager also testified that Dupuy had violated that confidentiality provision by contacting El Paso directly and that it was inappropriate for Dupuy to discuss such problems with a client.

Dupuy filed an unfair labor practice charge, alleging that NLS violated section 8(a)(1) of the NLRA 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.”

The National Labor Relations Board (Board) found the confidentiality provision was unlawful because it precluded employees from discussing compensation and other terms of employment with other parties. The NLS argued that its confidentiality provision did not violate the NLRA because it did not prevent employees from talking among themselves and, in any event, NLS did not enforce the clause as to protected union activity. The Board rejected that argument, finding the confidentiality provision overbroad because employees would construe such language to prohibit activity protected by Section 7 of the NLRA and therefore it was a violation of section 8(a)(1) even if not enforced as to such protected activity. The Board also rejected NLS’s argument that it should use a balancing test and consider the legitimate business reasons for the confidentiality provision.

On appeal, the First Circuit gave great deference to the Board due to the Board’s responsibility to develop and apply a coherent national labor policy and affirmed the decision.  The Court confirmed that Section 8(a)(1) has been interpreted to prohibit interference with an employee’s right to discuss the terms and conditions of employment with others.  An employer violates this section when it maintains a policy or rule that would have a chilling effect an employee’s exercise of such rights. The Court also upheld the Board’s decision not to use a balancing test, reasoning that any discipline pursuant to an unlawful policy or rule is itself unlawful regardless of whether the discipline would have occurred in the absence of the violation.

Employers – unionized and non-unioned – need to be familiar with the prohibitions under the NLRA 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 NLRB is finding these 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 very careful when disciplining or discharging employees for conduct involving communications to ensure that the conduct does not involve protected concerted activity.

In the above example, Jim needs to carefully consider the language of a confidentiality policy so that it does not violate the NLRA. He should also review other company policies and rules to ensure compliance with the law.