By: Savannah Wilt
Confidentiality clauses that define what employees are forbidden from sharing with the outside world are an important part of employment agreements. Confidentiality policies are a crucial part of any business that has trade secrets to protect from competitors. There is often a significant amount of proprietary information that employers may want to keep locked down. However, some federal government agencies care about what goes into confidentiality agreements and have policies in place to protect employees’ rights. It is important to keep these rights in mind to ensure that employment contracts are not infringing on protected rights.
Speaking of Federal Agencies
The National Labor Relations Board (NLRB) is an independent federal agency that enforces the National Labor Relations Act (the Act).
Congress enacted the Act in 1935 “to protect the rights of employees and employers, to encourage collective bargaining and to curtail certain private sector labor and management practices, which can harm the general welfare of workers, businesses and the U.S. economy.”
The NLRB strives to prevent and remedy unfair labor practices with 26 regional offices equipped to investigate and prosecute violations of the Act. Complainants may file charges with the NLRB Regional Director and the process proceeds in a familiar manner beginning with an investigation, continuing with a complaint and answer, and ending with a potential hearing before an Administrative Law Judge. The Court of Appeals can enforce, set aside, or remand all or part of the case, and the U.S. Supreme Court reviews appeals.
Section 7 Covers Confidentiality but Its Content is Not a Secret
For this discussion, the pertinent part of the Act is Section 7.
Section 7 guarantees that employees may discuss “wages, hours, and other terms and conditions of employment with fellow employees, as well as with nonemployees such as union representatives.”
Employers violate the Act if they include terms and conditions of employment that specifically prohibit, or would be reasonably understood by employees to prohibit, discussions of the terms of employment. This includes workplace complaints. Under Section 7, employees have the right to criticize and protest labor policies and employer treatment. These are protected communications that employers are unable to limit in confidentiality agreements or employment contracts.
In 2004, the NLRB decided rules that have a chilling effect on employee’s Section 7 rights are also prohibited.
Therefore, even if a rule or policy does not explicitly address a Section 7 activity, it is still unlawful if “1) employees would reasonably construe the rule’s language to prohibit Section 7 activity; 2) the rule was promulgated in response to union or other Section 7 activity; or 3) the rule was actually applied to restrict the exercise of Section 7 rights.”
This makes it tough to get around Section 7. It is important to note that broad language may encroach on Section 7 rights and violate the Act. A rule in the confidentiality agreement that uses broad language such as “employee information” or “personnel information” and fails to limit the scope of these terms likely violates Section 7.
Section 7 also governs employee criticism of the employer. The NLRB found that overly broad rules that may be construed to ban criticism or protests about supervisors and the employer, in general, are unlawful. This includes statements prohibiting negative comments about the company, “insubordination,” and social media posts that could affect the employer’s business or reputation, to name a few.
What Does the Act Allow?
Broad language such as a prohibition on “confidential” information is allowed under the Act if it does not also reference employee information or terms of employment. The Act does not prohibit businesses from protecting their legitimate interest in ensuring the privacy of business information if employees would not reasonably construe the rule to prohibit Section 7 activities. The Act generally allows rules that prohibit disclosure of “business secrets,” “confidential information,” “confidential financial data,” “proprietary company information,” “information regarding business partners,” and “information regarding customers.” The crux of many Section 7 cases is whether an employee would reasonably construe the rule to prohibit Section 7 rights. Therefore, context matters and each provision should be read in conjunction with the surrounding rules to ensure that employees will not misunderstand what the rule prohibits.
Let us Recap
Although confidentiality is an important part of protecting one’s business operations, employers cannot restrict employee’s ability to speak about the internal operations as it pertains to employee treatment and work conditions. Even broad language violates the Act if employees would perceive the rule as infringing on their Section 7 rights. Employers should avoid limiting employee’s rights to discuss wages, terms of employment, workplace investigations, and criticism of the employer. For more information on what is and is not lawful, you can view real-world examples provided in the NLRB Office of the General Counsel Memorandum: GC 15-04 available on the NLRB website. You are strongly encouraged to consult an attorney for more information and assistance writing a Section 7 compliant confidentiality agreement or employment contract.
This post has been reproduced with the author’s permission. It was originally authored on March 26, 2021, and can be found here.
Savannah Wilt, at the time of this post, is a third-year law student at Penn State Dickinson Law. She is an MBA student at Penn State Harrisburg and is a graduate of York College of Pennsylvania. Savannah is the current Treasurer of the Business Law Society and is pursuing a career assisting small businesses with legal matters.
Sources:
https://www.nlrb.gov/guidance/key-reference-materials/national-labor-relations-act
https://www.nlrb.gov/about-nlrb/what-we-do/introduction-to-the-nlrb
https://www.nlrb.gov/guidance/memos-research/general-counsel-memos
Photo Sources:
https://brownfoxlaw.com/nlrb-provides-employers-greater-leeway-to-discipline-abusive-employees/
https://hrdailyadvisor.blr.com/2016/10/10/listening-employee-complaints/
https://www.cbia.com/resources/hr-safety/issues-laws/labor-relations-law-union-issues/
