Flex Frac Decision Highlights Need for Employers to Reexamine Confidentiality Policies

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In recent years, the National Labor Relations Board (the “Board”) has waged a campaign against what it considers to be “overbroad” employer confidentiality policies. In dozens of decisions, the Board and administrative law judges have found unlawful employer work rules that run afoul of the Board’s prescription that employer’s may not maintain policies that are likely to be “reasonably construed” by employees to prohibit discussion and disclosure of information concerning wages and other terms and conditions of employment. While some employers may have anticipated that the courts would reign in the Board’s aggressiveness, the Fifth Circuit’s recent decision in Flex Frac Logistics, LLC v. NLRB, No. 12-60752 (5th Cir. Mar. 24, 2014), suggests that this may not be the case. As a result, employers should strongly consider examining their employee confidentiality policies to determine if they are consistent with current Board law.1

At issue in Flex Frac was a confidentiality policy that prohibited employees from “sharing” confidential information, including “financial information, including costs,” and “personnel information and documents.” The Board’s General Counsel issued a complaint against Flex Frac, alleging that the policy unlawfully prohibited employees from discussing employee wages. The Board held that the policy violated the National Labor Relations Act (the “Act”) because, although it made no reference to wages or other terms and conditions of employment, it could reasonably be interpreted by employees to prohibit discussing such subjects. See 358 NLRB No. 127 (2012).

The Fifth Circuit began its review of the Board’s decision by noting that “a workplace rule that forbids the discussion of confidential wage information patently violates section 8(a)(1) [of the Act].”2 If a work rule does not explicitly prohibit discussion of wages, it will nevertheless violate the Act if: 1) employees would “reasonably construe” it to prohibit Section 7 activity; 2) it was “promulgated in response to union activity”; or 3) it has been applied to restrict the exercise of protected rights. Flex Frac’s policy, the court held, violated the first of these criteria.

First, the list of confidential information covered by the policy “encompasses financial information, including costs, which necessarily includes wages and thereby reinforces the likely inference that the rule proscribes wage discussion with outsiders.” Second, Flex Frac offered no evidence that the policy was not in fact applied to preclude protected activity because it did not show that “non-management employees discussed their wages with non-employees.” Finally, the court emphasized that there is a “substantial difference” between “company business and documents,” which may properly be considered confidential and “personnel information,” which generally may not be. Accordingly, because “Flex Frac has implicitly included wage information in its list [of confidential information], especially in light of its prohibition against disclosing costs,” the company’s policy was overbroad and unlawful.

As noted, the Flex Frac decision gives sanction to the Board’s recent trend of substantially limiting the types of information that employers may prohibit employees from disclosing. For instance:

  • An administrative law judge (ALJ) held in The Kroger Co. of Michigan, No. 07-CA-098566 (NLRB Div. of Judges April 22, 2014), that an employer’s online communications policy was unlawful because, among other things, it prohibited all use of the employer’s “insignia, banner or logo” without permission, and barred discussion of “personnel matters” and information relating to “business plans.” With regard to this last prohibition, the judge concluded that “discussion of issues related to business plans would reasonably be understood by employees to cover a range of issues that are obviously subjects on which employees have a protected right to speak: i.e., transfer of employees, potential shutdowns, closures, layoffs, and transfer of work.”
  • In First Transit, Inc., 360 NLRB No. 72 (April 2, 2014), the Board held that an employer violated the Act when its general manager informed employees that they could not discuss wage rates among themselves.
  • In MCPC, Inc., 360 NLRB No. 39 (Feb. 6, 2014), the Board held that a policy barring internal disclosure of “personal or financial information” was overbroad.
  • An administrative law judge held that an employer’s admonition to a hospital employee not to discuss a misconduct investigation with other employees was unlawful since there was no showing that “witnesses needed protection, evidence was in danger of being destroyed, testimony [was] in danger of being fabricated, or there was a need to prevent a cover up.” William Beaumont Hosp., Case 07-CA-093885 (NLRB Div. of Judges Jan. 30, 2014).
  • A restriction on disclosure of “compensation structures” and ““incentive programs” was held to be overbroad because it “could lead an employee to believe that his ability to discuss his terms and conditions of employment with fellow employees, the media or a union were limited.” Boch Honda, Case No. 1-CA-83551 (NLRB Div. of Judges Jan. 13, 2014).
  • A judge held that a confidentiality rule that prohibited disclosure of discussions held during “peer review meetings” was unlawful because it “restricts employees’ right to discuss potential discipline, working conditions, and other information that employees are entitled to know and to share with coworkers.” Menorah Med. Ctr., Case No. 17-CA-088213 (NLRB Div. of Judges Dec. 23, 2013).
  • An ALJ concluded that a hospital system’s policy prohibiting use of the hospital’s logo without prior approval violated the Act because “[e]mployees have a Section 7 right to display a logo as part of their Section 7 communications,” and “[a] rule that permits widespread use of social media by employees for nonwork purposes but bars use of logos…violates Section 8(a)(1).” Shadyside Hosp., Case 06-CA-081896 (NLRB Div. of Judges April 19, 2013).
  • The Board held that a policy that instructed employees to “never discuss details about your job, company business or work projects with anyone outside the company” and designated “employee records” as confidential information violated § 7. DirecTV U.S. DirecTV Holdings, LLC, 359 NLRB No. 54 (Jan. 25, 2013).

In light of Flex Frac, the decisions discussed above, and myriad other cases, employers must be very careful in crafting and implementing employee confidentiality policies. Blanket prohibitions on discussing wages and other terms and conditions of employment, requirements that all internal investigations be kept confidential regardless of the specific circumstances involved, and social media policies that flatly bar the use of company logos and “disparaging” statements are likely to be found to be unlawful, even if they are never applied to restrict protected conduct. While there are undoubtedly many types of information that may validly be kept confidential, employers must be wary of casting too broad a net and exposing themselves to liability. Accordingly, prudent employers should reexamine existing confidentiality, social media and non-disparagement policies, and keep a close eye on the Board’s decisions in this area.

Footnotes

1

 
While the Board has been the most active governmental agency in challenging confidentiality policies, other agencies may soon wade into the fray. For instance, in Equal Employment Opportunity Commission v. CVS Pharmacy Inc., No. 1:14-cv-00863 (U.S.D.C., N.D. Ill.), the EEOC alleges that CVS engaged in a “pattern or practice” of interfering with employee rights under Title VII of the Civil Rights Act of 1964 by including broad confidentiality provisions in severance agreements. According to the EEOC’s complaint, CVS's separation agreements are “overly broad, misleading and unenforceable” because they interfere with employees’ rights to file charges of discrimination with the EEOC. While the suit focuses on severance agreements, rather than general employer policies, the EEOC’s arguments suggest that the Commission views issues of employee confidentiality to be ripe for litigation.

2

 
Section 8(a)(1), 29 U.S.C. § 158, states that it is “an unfair labor practice for an employer…to interfere with, restrain or coerce employees in the exercise of the rights guaranteed in [Section 7 of the Act].” Section 7, 29 U.S.C. § 157, protects, among other things, employees’ rights to form, join and assist labor unions and to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

 

Topics:  Confidentiality Policies, Corporate Counsel, Employee Rights, Employer Liability Issues, Employment Policies, Flex Frac, NLRB

Published In: Administrative Agency Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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