Our Lips Are Sealed?

Gag Order on Discussing Wages and Other Terms of Employment Held Unlawful

Most employers have some sort of confidentiality policy in place, whether it's in an employment contract, an employee handbook or a stand-alone policy. Obviously, confidentiality of company information is of utmost importance in protecting your business, but an overly-broad confidentiality policy may restrict certain rights afforded to employees under Section 7 of the National Labor Relations Act (NLRA) and expose an employer to litigation and damages. The danger is equally present for both unionized and non-union companies.

Section 7 of the NLRA states that employees have 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 and protection. Section 8 of the NLRA protects those rights by making it unlawful to interfere with them.

In Northeastern Land Servs. Ltd. d/b/a NLS Group, 352 NLRB No. 89, (2008), the National Labor Relations Board addressed the issue of protected speech head on by holding that the employer committed an unfair labor practice when it terminated an employee for discussing his compensation with a third-party employer. In the NLS decision, the applicable language of the confidentiality agreement in the employment contract was "the terms of this employment, including compensation, are confidential to Employee and the NLS Group. Disclosure of these terms to other parties may constitute grounds for dismissal." NLS terminated the employee for violating this language and, by doing so, violated the NLRA.

The board held, "If the rule explicitly restricts Section 7 activity, it is unlawful." Moreover, "If the rule does not explicitly restrict Section 7 activity, it is nonetheless unlawful if (1) employees would reasonably construe the language of the rule 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 and other decisions, the board appears to liberally apply the phrase "reasonably construe the language of the rule to prohibit Section 7 activity." Previously, the board found that a more innocuous policy to violate the act. The policy read, "We honor confidentiality. We recognize and protect the confidentiality of any information concerning the company and its business plans, partners, new business efforts, customers, and accounting and financial matters." The company's handbook subjected employees to discipline, including termination, for violating this policy. This policy also violated the NLRA, because employees could reasonably construe such a policy to restrict their discussion of wages or other terms and conditions of employment with other employees or union representatives.

Employers should take time to review their own confidentiality policies. A carefully crafted policy can protect vital information while complying with the requirements of the NLRA and other federal and state laws.

Michael Dalrymple is an associate in the Firm's Labor Practice Group. His practice includes a wide variety of employment litigation and a focus on issues arising under the Fair Labor Standards Act.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice.  The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.