Confidentiality Policies Continue to be Challenged

Written by Robert A. Wiesen

In recent years, the National Labor Relations Board (NLRB) and federal courts have ruled that employer confidentiality policies that prohibit employees from copying, discussing or disclosing their compensation, benefits or working conditions are illegal. The latest case in point is a March 24, 2014 decision by the United States Court of Appeals for the Fifth Circuit involving Flex Frac Logistics.

Flex Frac Logistics, a Fort Worth, Texas non-union trucking company, promulgated the following “Confidentiality Policy”:

Employees deal with and have access to information that must stay within the Organization. Confidential Information includes, but is not limited to, information that is related to: our customers, suppliers, distributors; [our] organization management and marketing processes, plans and ideas, processes and plans; our financial information, including costs, prices; current and future business plans, our computer and software systems and processes; personnel information and documents, and our logos, and art work. No employee is permitted to share this Confidential Information outside the organization, or to remove or make copies of any [of our] records, reports or documents in any form, without prior management approval. Disclosure of Confidential Information could lead to termination, as well as other possible legal action.

An administrative law judge found that while the policy made no reference to wages or other terms or conditions of employment, it violated the National Labor Relations Act (NLRA) because it was overly broad and contained language employees could reasonably interpret as restricting the exercise of rights protected by the NLRA. On appeal, the NLRB adopted the administrative law judge’s findings and the Fifth Circuit enforced the NLRB’s order.

Two key sections of the NLRA are at the heart of these decisions. The first is Section 7 which gives 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 second is Section 8(a)(1) which states that 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 7.”

Sections 7 and 8(a)(1) apply to union and non-union employees. Therefore, all employers who have broad policies prohibiting employees from copying, discussing or disclosing “confidential information” may be at risk of unfair labor practice litigation and liability. The standard remedies for employers who discharge employees for violating unlawful confidentiality policies include cease and desist, policy rescission or modification, reinstatement, back pay, and posting conspicuous notices informing employees of their Section 7 rights and assuring them the employer will not violate the NLRA in the future.

In light of these decisions, we recommend that employers carefully review their confidentiality policies to determine whether they comply with the NLRA. Additionally, employers should exercise caution and seek legal advice before discharging employees for violating confidentiality policies.

If you have questions, please contact the author or any other CB&D attorney.

About the Author
Robert A. Wiesen
Partner
  Mr. Wiesen is an “AV” rated lawyer – the highest rating by Martindale-Hubbell for legal ability and professional ethics. He has...
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