Really? Requiring Someone To Use Information “Fairly And Lawfully” Can Be Illegal?


Companies have lots of very good reasons for adopting codes of conduct.  These reasons include:

  • Ensuring compliance with applicable exchange listing rules (e.g., NYSE Rule 303A.10 and NASDAQ Rule 5610);
  • Minimizing the risk of securities law violations (e.g., Regulation FD and Rule 10b-5);
  • Protecting company assets (trade secrets as well as reputational assets);
  • Complying with contractual obligations requiring confidentiality; and
  • Complying with customer and employee privacy laws and regulations.

Thus, I was amazed to see a recent decision by a panel of the National Labor Relations Board finding the following language in a code of conduct to be unlawful:

Keep customer and employee information secure.  Information must be used fairly, lawfully and only for the purpose for which it was obtained.

Fresh & Easy Neighborhood Market and United Food & Commercial Works Int’l Union, Cases 31-CA-077074 and 31-CA-080734 (July 31, 2014).   The NLRB found that this language violated employees’ rights under Section 7 of the National Labor Relations Act which guarantees employees “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 or protection”.  Reversing the administrative law judge, the panel found that employees would reasonably construe the above language “to prohibit discussion and disclosure of information about other employees, such as wages and terms and conditions of employment”.  Really?  This admonition was included at page 16 of a 20 page booklet primarily dedicated to a variety of ethical matters.  In my view, it is arbitrary and capricious, if not just plain bizarre, to interpret this language as conveying any limitation on employees’ Section 7 rights.


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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