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Employers Wise to Review Employee Confidentiality Policies as Fifth Circuit Upholds NLRB’s Invalidation of Overly Broad Provisions


Employers Wise to Review Employee Confidentiality Policies as Fifth Circuit Upholds NLRB’s Invalidation of Overly Broad Provisions

April 11, 2014

It has been a difficult last few years for the National Labor Relations Board (NLRB). Not only are hundreds of decisions of the agency in limbo due to a Supreme Court challenge involving President Barack Obama’s purported recess appointment of several members of the agency while the U.S. Senate was still convening in regular pro forma session, but several of the agency’s rulings have been invalidated by various Circuit Courts of Appeal. The board recently managed to win one, however, as the U.S. Court of Appeals for the Fifth Circuit upheld a board decision that a company’s employee confidentiality policy was an unfair labor practice in violation of Section 8(a)(1) of the National Labor Relations Act (NLRA). The case serves as a reminder to employers to review their own employee confidentially policies.

The facts of Flex Frac Logistics, L.L.C. v. NLRB are relatively straightforward. Flex Frac Logistics, a non-union trucking company, required all of its employees to sign a confidentiality agreement which provided: 

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; Silver Eagle Logistics LLC 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 Silver Eagle Logistics LLC 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.

Following a charge being filed, the Acting General Counsel issued a complaint which alleged that the company promulgated and maintained a rule prohibiting employees from discussing employee wages in violation of Section 8(a)(1). The administrative law judge determined that even though the language of the policy did not specifically refer to wages or specific terms and conditions of employment, the clause violated the NLRA because it was overly broad and contained language which could reasonably be interpreted as restricting the exercise of the employees’ Section 7 rights under the act. A split board affirmed this decision. 

On appeal, a panel of the Fifth Circuit unanimously decided to enforce the board’s order. After first holding that Flex Frac waived its constitutional challenge to the composition of the Board at the time of the decision by failing to raise it in its initial brief, the court turned to the agreement. The parties agreed that the rule did not “explicitly restrict activities protected by Section 7,” so the court turned its attention to whether the rule implicitly restricted such activities. A workplace rule violates Section 8(a)(1) when it falls within one of the following categories: 

  • (1) employees would reasonably construe the language to prohibit Section 7 activity;
  • (2) the rule was promulgated in response to union activity;
  • or (3) the rule has been applied to restrict the exercise of Section 7 rights. 

In this particular case, the failure of the policy to provide that wages and other conditions of employment are not included within the scope of the “personnel information” that is restricted from dissemination was fatal to the policy. 

In affirming the invalidity of the employer’s policy, the court, however, reminded Flex Frac that it was only prohibited by the enforcement order from “[p]romulgating and maintaining an overly broad and ambiguous confidentiality rule that … may reasonably be read to prohibit employees from discussing wages or other terms and conditions of employment.” In guidance both to Flex Frac and other employers, the court indicated that the company could redraft its policy to “maintain confidentiality for employee-specific information like social security numbers, medical records, background criminal checks, drug tests, and other similar information.” 

Is your organization currently using an employee confidentiality policy that could be construed to prevent employees from discussing wages and terms and conditions of employment? When is the last time your organization had its confidentiality policies reviewed? The Labor and Employment Team at Goldberg Segalla will provide periodic updates on developments in these areas, but for more specific guidance, contact: