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Hypothetical Violations Doom Employer Confidentiality Policy

Late last month, the 5th Circuit court of appeals in New Orleans ruled on another employer confidentiality policy, and the results should trouble employers everywhere.

April 15, 2014
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Related Topics: Legal Compliance, Labor Relations, Policies and Procedures, Legal
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A few months ago I posted on the National Labor Relation Board’s veto of a workplace confidentiality policy. Late last month, the 5th Circuit court of appeals ruled on another employer confidentiality policy, and the results should trouble employers everywhere.

At issue in Flex Frac Logistics v. NLRB was the following workplace 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 financial information …; [and] personnel information and documents…. 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.

The appellate court affirmed the NLRB’s decision that this policy infringed on the rights of employees to engage in protected concerted activity:

A “workplace rule that forb[ids] the discussion of confidential wage information between employees … patently violate[s] section 8(a)(1).” … As the NLRB noted, the list of confidential information encompasses “financial information, including costs[, which] necessarily includes wages and thereby reinforces the likely inference that the rule proscribes wage discussion with outsiders.” The confidentiality clause gives no indication that some personnel information, such as wages, is not included within its scope.

Particularly troubling is the NLRB’s summary rejection of the employer’s argument that the policy should survive because it had never interpreted or applied it to restrict employees’ Section 7 rights, such as the right to discuss wages. As the court noted, “the actual practice of employees is not determinative,” as long as one could reasonably interpret the policy as a restriction on Section 7 rights.

In other words, employers need to safeguard their policies against what-ifs and hypotheticals, a daunting task. In a passing notation, the court does note that Flex Frac’s policy failed, in part, because it did not expressly exclude “personnel information, such as wages.” Going forward, employers should consider including this carve-out in their confidentiality policies to help avoid NLRB scrutiny.

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