NLRB Judge Rules on Confidentiality and Non-Disparagement Provisions

by Morgan Lewis
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ALJ strikes down provisions in an employment agreement for violating the NLRA, finding they chilled employees' exercise of Section 7 rights.

On January 8, an Administrative Law Judge (ALJ) for the National Labor Relations Board (NLRB) issued a decision in Quicken Loans, Inc., striking down the confidentiality and non-disparagement provisions in an agreement between an employer and existing employees.[1] The ALJ concluded that such provisions violate Section 8(a)(1) of the National Labor Relations Act (NLRA) because they tend to chill employees' exercise of their Section 7 rights. This decision reflects a continuing trend in the prosecution of unfair labor practice charges concerning policies or agreements with these types of provisions. In light of this trend, employers should consider making revisions and adding disclaimers to their employment agreements to demonstrate that none of the provisions within are intended to prohibit or chill employees' rights to engage in protected concerted activity.

Background

In October 2011, mortgage banker Lydia Garza, a nonunion employee, voluntarily resigned from Quicken Loans. Shortly thereafter, Quicken sued Garza and five other former employees to enforce the confidentiality, noncompetition, and employee and client no-contact/no-solicitation provisions contained in the Mortgage Banker Employment Agreement (Agreement) that all Quicken mortgage bankers had been required to sign during their employment. Garza responded by filing an unfair labor practice charge, alleging that the provisions at issue violated Section 8(a)(1) of the NLRA.

Garza challenged two provisions of the Agreement—"Proprietary/Confidential Information" (Proprietary/Confidential Information provision) and "Non-Disparagement" (Non-Disparagement provision). The former provision required employees to "hold and maintain all Proprietary/Confidential Information in the strictest of confidence" and stated that employees could not "disclose, reveal or expose any Proprietary/Confidential Information to any person, business or entity." The agreement went on to define "Proprietary/Confidential Information" to include "any non-public information relating to or regarding the Company's . . . personnel," including "personal information of co-workers . . . such as home phone numbers, cell phone numbers, addresses, and email addresses" as well as "personal financial information, . . . background information, personal activities, information pertaining to work and non-work schedules, contacts, meetings, meeting attendees, [and] travel[.]"

The Non-Disparagement provision prohibited employees from "publicly criticiz[ing], ridicul[ing], disparag[ing], or defam[ing]" Quicken or its "products, services, policies, directors, officers, shareholders, or employees, with or through any written or oral statement or image (including . . . any statements made via websites, blogs, postings to the internet, or emails . . . )."

The Decision

The ALJ began by recognizing that "[t]he line between lawful and unlawful restrictions is very thin and often difficult to discern."[2] Nonetheless, the ALJ concluded that the two provisions at issue violated the NLRA because they "would reasonably tend to chill employees in the exercise of their Section 7 rights."[3] With regard to the Proprietary/Confidential Information provision, the ALJ found that the prohibitions in that provision would leave employees unable to "discuss with others, including their fellow employees or union representatives, the wages and other benefits that they receive, the names, wages, benefits, addresses or telephone numbers of other employees."[4] Thus, reasoned the ALJ, the Proprietary/Confidential Information provision substantially curtailed the right of Quicken employees to engage in protected concerted activity, as permitted by Section 7.

The ALJ also found that the Non-Disparagement provision's prohibition on public criticism of Quicken violated the employees' rights to engage in protected concerted activity. According to the ALJ, an employee subject to the Agreement "could reasonably construe [the Non-Disparagement provision] as restricting his rights to engage in protected concerted activities" because "employees are allowed to criticize their employer and its products as part of their Section 7 rights, and employees sometimes do so in appealing to the public, or to their fellow employees, in order to gain their support."[5] In reaching his decision, the ALJ made no distinction between the application of the challenged provisions to current versus former employees.

To remedy the unfair labor practices, the ALJ issued an order requiring Quicken to cease and desist from maintaining the Proprietary/Confidential Information and Non-Disparagement provisions in the Agreement and to notify all of its mortgage bankers that the provisions would be rescinded and not enforced. Quicken was further required to notify all employees that it would not prohibit them from discussing the terms and conditions of their employment "in a manner protected by the [NLRA]."[6]

Guidance for Employers

While this ALJ decision is not binding precedent, it does reflect current trends at the NLRB. Accordingly, employers should take notice of the NLRB's continued expansion into nonunion workplaces and consider the following guidance:

  • Employers should revisit employment agreements and workplace policies that contain confidentiality and non-disparagement provisions. They should avoid implicit or explicit prohibitions on employees discussing their terms and conditions of employment, including prohibitions on discussing wages and benefits, or the names, wages, benefits, or contact information of their co-workers. Employers should also watch for overly broad prohibitions on employee use of social media and similarly public avenues of communication; such prohibitions could be interpreted to bar discussion of the terms and conditions of employment. Agreements and policies should be narrowly tailored to a company's specific confidentiality needs and concerns.
  • Employers should also consider using disclaimers in confidentiality and non-disparagement provisions to state that nothing within the provisions is meant to prohibit an employee's exercise of his or her rights under Section 7 of the NLRA. While not a guarantee of protection from NLRB scrutiny, such language may help employers to avoid a finding that their employees reasonably believed the provisions restricted their rights to engage in protected concerted activity. Employers should also include specific examples of the types of conduct prohibited by the confidentiality or non-disparagement provisions (e.g., "employees may not post or display comments about co-workers or supervisors that are vulgar, obscene, or threatening") and explanations of the interests they are attempting to protect, which may demonstrate to employees that their right to engage in protected concerted activity is not being impacted.

[1]. Quicken Loans, Inc., No. 28-CA-75857 (Jan. 8, 2013), available here.

[2]. Id. at 4.

[3]. Id.

[4]. Id.

[5]. Id.

[6]. Id. at 5.

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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