Flex Frac Decision Highlights Need for Employers to Reexamine Confidentiality Policies

by Dechert LLP
Contact

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.”

 

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.

© Dechert LLP | Attorney Advertising

Written by:

Dechert LLP
Contact
more
less

Dechert LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.