Recent NLRB Decision Places Increased Scrutiny on Confidentiality Policies and Agreements

Unionized and union free employers should review their confidential information policies, confidentiality agreements and related policies (such as business ethics statements with confidentiality provisions) to make sure maintenance of such policies does not violate the National Labor Relations Act. A recent decision by the National Labor Relations Board underscores the risk that such policies may inadvertently infringe on employee rights under the Act, which makes it unlawful for an employer to interfere with, restrain or coerce employees exercising their right to engage in concerted activities for the purpose of collective bargaining or other mutual aid or protection.

In Cintas Corp., 344 NLRB No. 118 (June 30, 2005), the Labor Board found that a generically worded non-disclosure of confidential information policy violated the Act because the policy could be construed as prohibiting employees from discussing the terms and conditions of their employment with coworkers or third parties. Significantly, the confidentiality policy was rather unremarkable on its face – it was not intended to restrict employees' rights, and no discipline had been invoked pursuant to the policy, even though the employer was aware that employees had violated it in the past.

The policy the Board found objectionable stated:

We honor confidentiality. We recognize and protect the confidentiality of any information concerning the company, its business plans, its partners, new business efforts, customers, accounting and financial matters.

"Partners" was the term the employer used for employees generally. The policy also stated that violating a confidence or unauthorized release of confidential information could result in disciplinary action.

The Board found the policy to be illegal because "the rule's unqualified prohibition of the release of 'any information' regarding 'its partners'" could be interpreted as illegally restricting employees' right to discuss their pay and working conditions in violation of Sections 7 and 8(a)(1) of the National Labor Relations Act. The Board held that the mere existence of a policy can be illegal under those sections, if the policy can be construed by employees as precluding them from discussing the terms and conditions of their employment, even if it is not enforced. This is a continued refinement of the long-standing Board policy that blanket prohibitions on employees discussing their wages and other terms and conditions of employment are violations of Section 8(a)(1). See, e.g., Jeannette Corporation v. NLRB, 532 F.2d 916 (3d Cir. 1976); International Business Machines Corp., 265 NLRB No. 107 (1982).

If a policy is clearly aimed at only protecting the proprietary information of the business, however, it is lawful. For example, when analyzing a policy stating it was unacceptable for employees to divulge "Hotel-private" information to those not authorized to receive the information, the Labor Board found that the policy was lawful. In a close decision, the Board said employees reasonably could not read the rule as prohibiting discussion of wages and working conditions among fellow employees or with a union. Lafayette Park Hotel, 326 NLRB No. 69 (1998). The Board said that although the term "Hotel-private" was not defined, employees reasonably would understand that the rule was designed to protect a legitimate business interest of the employer rather than prohibit discussion of their wages.

What Employers Should Do

In light of the Board's decision in Cintas, employers should review their confidentiality policies and agreements mindful of what the administrative law judge in Cintas called the "ultimate question" – could an employee reading the policy reasonably construe it to preclude a discussion of the terms and conditions of employment with other employees or with a union, rather than to protect the employer's legitimate proprietary and business interests? Cintas Corp., 344 NLRB No. 118, slip op. at 4. If the answer to the question is yes, the policy may violate employees' rights under the National Labor Relations Act, regardless of whether they are represented by a union or not.

The difficulty lies in balancing employees' rights under Section 7 with the employer's legitimate interest in keeping its internal information confidential and out of the hands of competitors and others who might try to harm the employer's business. Certainly, employers consider information regarding their employees' identities, compensation, skills and abilities as confidential, and some states, such as California, give employees certain privacy rights regarding personal information. In addition, it is important for employers with non-solicitation and anti-raiding covenants to view such personnel information as confidential.

To the extent possible, policies and contractual provisions should be revised to define the personnel information not to be disclosed as narrowly as possible. Such policy language should not use broad or vague terms, such as "information regarding employees" or "information regarding wages," as examples of confidential information. For further protection, employers may wish to modify non-disclosure provisions only to provide that confidential personnel information may not be disclosed to future employers or competitors. It would be hard for the Board to find that such a limited restriction impinges on Section 7 rights to seek mutual aid and protection, and was not a clause designed to protect the employer's legitimate business interests.

While some commentators have suggested including a savings clause, such as "this policy is not intended to restrict an employee's rights under federal law," this may not be sufficient protection if the confidentiality provisions are not correctly drafted. Further, such a clause could be contrary to an employer's business interests, and in any event should not be necessary if the confidentiality and non-disclosure provisions are carefully and lawfully drafted.

Jackson Lewis attorneys are available to assist employer in drafting, reviewing, and revising lawful and effective confidentiality and non-disclosure provisions in employee handbooks, personnel policies, employment agreements, and other documents and statements.