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Fifth Circuit Upholds Finding That Overly Broad Confidentiality Agreement Violated the National Labor Relations Act




by:
John W. Alden
Kilpatrick Townsend & Stockton LLP - Atlanta Office

Randall D. Avram
Kilpatrick Townsend & Stockton LLP - Raleigh Office

Charles E. Feuss
Russell A. Jones
Susan W. Pangborn
Kilpatrick Townsend & Stockton LLP - Atlanta Office

 
April 1, 2014

Previously published on March 31, 2014

We have reported in previous Legal Alerts that the National Labor Relations Board (“NLRB”) is closely scrutinizing employers’ personnel policies and workplace rules to identify language that unlawfully restricts employees’ rights under the National Labor Relations Act (“NLRA”). On March 24, 2014, the United States Court of Appeals for the Fifth Circuit upheld an NLRB finding that an employee confidentiality agreement’s provision prohibiting employees from disclosing “financial information” and “personnel information and documents” to outsiders violated the NLRA.

The Court’s Decision in Flex Frac Logistics, L.L.C. v. NLRB

The NLRA gives employees the right to act concertedly for the purpose of collective bargaining or other mutual aid and protection. The NLRB and the courts have recognized that this statutory provision gives employees the right to discuss wages and other terms and conditions of employment with each other and with a union. An employer’s interference with this right, whether by disciplining employees who exercise the right, by expressly prohibiting such conduct, or by merely maintaining a workplace rule that chills the exercise of the right, is an unfair labor practice under the NLRA.

In its recent decision in Flex Frac Logistics, L.L.C. v. NLRB, the Fifth Circuit reviewed an NLRB decision finding that an employee confidentiality agreement unlawfully interfered with employees’ right to engage in protected concerted activity. The confidentiality agreement prohibited employees from disclosing confidential information to anyone outside the company and defined “confidential information” to include “financial information” and “personnel information and documents.” Although the agreement did not explicitly prohibit the disclosure of wage information, the Fifth Circuit found sufficient evidence to support the NLRB’s conclusion that the agreement would chill employees’ exercise of their rights under the NLRA because employees would reasonably believe that the agreement prohibited the disclosure of wage information. The court noted that the agreement’s definition of confidential information included “financial information,” which necessarily encompasses wages, and that the reference to “personnel information” was not limited so as to exclude wage information. Moreover, the court stated that the NLRB did not have to base its finding of an unfair labor practice in this regard on evidence that employees did, in fact, interpret the confidentiality agreement as restricting their disclosure of wage information to outsiders. It is sufficient, the court held, that the language of the agreement would reasonably tend to chill employees’ exercise of their NLRA rights. Because the language at issue here could reasonably be interpreted as barring disclosure of wage rates, the court upheld the NLRB’s ruling that the confidentiality agreement violated the NLRA.

Practical Implications

In recent years, the NLRB has applied increasing scrutiny to employee handbooks, workplace rules, and employment contracts to identify provisions that may reasonably be interpreted as prohibiting conduct protected by the NLRA, even going so far as to find a handbook provision requiring employees to be courteous to others unlawful. As the Flex Frac Logistics decision illustrates, employers cannot rely on the courts to rein in the NLRB’s excesses in this area. Employers should therefore be proactive in reviewing their personnel policies and employee agreements to ensure that they do not contain provisions that are so broadly worded as to infringe upon employees’ right to act in concert with respect to the terms and conditions of employment. Often, the addition of only a few clarifying words can make the difference between a lawful rule that furthers the employer’s legitimate business interests and an unlawful rule that can lead to costly unfair labor practice proceedings.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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