The NLRB Expands the Use of Confidentiality Rules in The Boeing Co.

by Littler
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As most employers are aware, the National Labor Relations Board’s decision in The Boeing Co., 365 NLRB No. 154 (2017), established a new standard that significantly broadens the scope of rules, policies, and handbook provisions that lawfully may be maintained under the National Labor Relations Act.  The General Counsel’s recent Memorandum GC 18-04 (Guidance on Handbook Rules Post-Boeing) provides important guidance about how the Board’s decision will affect many types of workplace rules, including taking on the challenging task of categorizing confidentiality rules as lawful or unlawful.

In its decision, the Board established a balancing test to be applied to rules that reasonably may be construed to interfere with Section 7 rights.  Rules that are justified by employer interests that outweigh their impact on employee rights will be found categorically lawful.  In illustrating the type of rules that would be considered categorically unlawful under the new test, the Board described rules that restrict employees’ right to communicate with one another about wages and benefits as being at the top of the list.  Such rules restrict core employee rights and generally are not outweighed by any countervailing justifications.

Confidentiality rules cover a number of subjects, however, and The Boeing Co. likely will result in approval of many provisions the Board previously has considered unlawful.  These include a range of provisions that do not restrict employee information or prevent coworker discussions about the workplace.  Even confidentiality provisions that arguably restrict peripheral employee rights may be broadly justified by employers’ rights to protect their businesses from unfair competition, defend valuable data, secure operating methods and techniques, and prevent legal exposure.  In fact, Boeing successfully defended the no-camera rule that was at issue in its case by asserting the need to protect its proprietary information and production processes from disclosure.

In several earlier cases, former Chairman Philip Miscimarra wrote separate opinions advocating for the Board’s adoption of the new The Boeing Co. standard.  He concluded that under it, confidentiality directives prohibiting disclosure of confidential, proprietary, business, and customer information generally are lawful to maintain.  The General Counsel’s recent Memorandum expands on these concurring and dissenting opinions and concludes that many confidentiality rules that do not restrict employee rights will be treated categorically as lawful.

Rules Treating Information About Employees and Their Employment Terms as Confidential

Employees have a broad right to communicate with one another about wages, benefits, and other terms and conditions of their employment.  Under the former standard established by the Board in Lutheran Heritage Village-Livonia, 343 NLRB 646 (2004), rules that employees reasonably would construe to restrict that right routinely were found unlawful.

The Board in more recent years heightened its standard and construed arguably ambiguous workplace rules against the employer.  As a result, when a rule contained an unqualified prohibition on discussing “confidential” information generally, the Board frequently found it unlawful.  Generic confidentiality restrictions were treated as invalid because “an employer has a duty to minimize its impact on protected activity” by preventing rules from being misunderstood.  See Boeing Co., 362 NLRB No. 195 (2015).  These decisions assumed the invalidity of confidentiality provisions absent limiting language that clearly excluded protected communications from their scope.  See Fresh & Easy Neighborhood Market, 361 NLRB No. 8 (2014) (Member Johnson, dissenting, noting that the current majority “signals its intent to steer the Board . . . towards a presumption that certain rules are unlawful unless there is an explicit exception for Section 7 activity”).  In short, the Board placed the burden on employers to explicitly exclude information about employees and the terms and conditions of their employment from confidentiality policies.

The Boeing Co. reverses this course.  The Board now will begin its analysis by asking whether a rule reasonably interferes with protected employee rights.  This approach marks a return to the original Lutheran Heritage Village standard, where the Board held that in determining whether employees would reasonably construe work rules to prohibit Section 7 activity, it will give the rules a “reasonable reading,” refrain from “reading particular phrases in isolation,” and “must not presume improper interference with employee rights.”  The Boeing Co. necessarily overrules prior cases finding confidentiality rules unlawful simply because they are broad.

At minimum, the standard under The Boeing Co. seems to require that to be unlawful, a rule must at least mention wages, benefits, or employment conditions within the definition of restricted information.  Thus, in The Boeing Co., the Board cited as the prototypical example of a categorically unlawful rule one that “prohibits employees from discussing wages or benefits with one another.”  The same result would apply to a rule prohibiting disclosure of “wage and salary information,” G4S Secure Solutions, 364 NLRB No. 92 (2016) (Miscimarra, concurring in part), and a rule prohibiting employees from disclosing their “salaries, contents of employment contracts,” or “staff addresses and phone numbers.”  Long Island Assoc. for AIDS Care, Inc., 364 NLRB No. 28 (2016) (Miscimarra, concurring in part).

Rules Treating Proprietary, Business, and Customer Information As Confidential

A confidentiality provision that does not refer to employee information or working conditions generally does not restrict employees from engaging in concerted activities and should be expected to be found lawful under The Boeing Co.  As an illustration, Member Miscimarra concluded in his dissent in Schwan’s Home Service, 364 NLRB No. 20 (2016), that a rule prohibiting disclosure of “information concerning customers” is lawful because customers are not involved in activities such as the collective bargaining process.  He reasoned that “although two or more employees may sometimes concertedly engage in NLRA-protected conduct that implicates customer information, I believe this is likely to occur in limited circumstances, and in such cases, I believe the Board can independently address whether applying [the rule] against such conduct violates” the Act.  Because employers have a compelling interest in prohibiting the disclosure of customer information, such rules should be considered broadly lawful under the new standard.

In his recent guidance Memorandum, the General Counsel takes this interpretation a step further and defines rules generally protecting confidential, proprietary, and customer information as categorically lawful under The Boeing Co.  As the General Counsel points out, a ban on discussing confidential information should not be assumed to affect employees’ rights unless employment terms at least are mentioned.  Given the substantial legitimate interests behind such rules, and the minor impact they have on protected activity, the Board’s Regional offices have been instructed to consider them lawful when reviewing unfair labor practice cases.

Examples of the types of rules the General Counsel will treat as categorically lawful under the Board’s new standard include the following:

  • “Information concerning customers . . . shall not be disclosed, directly or indirectly” or “used in any way.”
  • Do not disclose confidential financial data, or other non-public proprietary company information.  Do not share confidential information regarding business partners, vendors, or customers.
  • “Divulging Hotel-private information to employees or other individuals” is prohibited.
  • No unauthorized disclosure of business secrets or other confidential information.

Prohibitions on Disclosure of Information Obtained From the Employer

Employers retain substantial information in their records, and much of it concerns employees.  Often this information is highly sensitive in nature.  Employee social security numbers, identification or account numbers, and protected medical information that may be housed in the employer’s files typically would not be needed for employees to engage in concerted activities.  However, protecting such information from disclosure is critically important to prevent identity theft and privacy intrusions, and to avoid liability.  Rules protecting this type of highly sensitive employee information very likely will be found lawful under the Board’s new balancing test.  See Verizon Wireless, 365 NLRB No. 38 (2017) (Miscimarra, dissenting in part) (“Nobody can reasonably question the importance of maintaining the confidentiality of information such as social security numbers, identification numbers, passwords, and financial information.”).

In addition, and more broadly, the information contained in an employer’s files should be subject to the employer’s control like any of its other assets.  The Board’s traditional rule has been that “employees may use for self-organizational purposes information and knowledge which comes to their attention in the normal course of work activity and association but are not entitled to their Employer’s private or confidential records.”  Ridgely Mfg. Co., 207 NLRB 193, 196-97 (1973).  For instance, an employee was not entitled to demand from the employer a list of his coworkers, but was engaged in protected activity when he was memorizing the names of fellow employees from timecards for the purpose of contacting them about union organizing.  Thus, employees may use information that is openly available to them, but may not disclose the employer’s internal confidential information without authorization.  See International Business Machines Corp., 265 NLRB 638 (1982).

In Macy’s, Inc., 365 NLRB No. 116 (2017), the Board recently ruled that a confidentiality policy limiting the use or disclosure of customer names and contact information was lawful, despite that such information could be used to communicate about labor disputes.  The policy by its terms applied only to customer information obtained from the employer’s own confidential records.  In ruling the policy lawful, the majority wrote that “[t]he Act does not protect employees who divulge information that their employer lawfully may conceal.”  Id.  Because the policy at issue restricted only the use or disclosure of confidential customer information that the employer “has” or “maintains,” it was lawful.  Id.

Nothing in The Boeing Co. undermines the rule in Macy’s, Inc.  To the contrary, the same rationale applies to rules protecting information in the employer’s files even when it includes employee information that otherwise is protected.  In Verizon Wireless, 365 NLRB No. 38 (2017), then-Chairman Miscimarra dissented, arguing that a rule restricting disclosure of employees’ home addresses and phone numbers in its files was lawful.  He argued that “disclosing information contained in the [employer’s] confidential files would not typically be protected by the Act.”

As the General Counsel pointed out in his recent guidance Memorandum, restricting disclosure of information from the employer’s files is quite different from restricting discussions about or use of the information generally.  While employees must remain free to share coworkers’ contact information, or other information about the workplace, they need not be permitted to violate internal information protection policies.  “Given the substantial legitimate interests behind such rules, and the little, if any, adverse impact on NLRA-protected activity,” such rules should be considered categorically lawful.

Other Rules Requiring Further Guidance; Confidentiality of Arbitration Proceedings and Participation in an Investigation

The Board’s announcement in The Boeing Co. of lawful and unlawful categories of rules promises to significantly increase certainty in the Board’s rules cases.  Of course, how the Board defines the types of rules that will be placed in these categories will go a long way toward determining how useful they will be.  The General Counsel’s Memorandum is very valuable in this respect, but additional guidance in several areas still is needed.

It is difficult to predict how some common confidentiality provisions will be categorized by the Board in future cases.  For instance, when an arbitration agreement covering employment claims contains a confidentiality restriction, there is a real risk that the Board will treat it as unlawful under The Boeing Co.  In one case then-Member Miscimarra concurred with the Board majority that a provision treating all arbitration proceedings as confidential was unlawful, noting that “there may be circumstances where an arbitration agreement’s confidentiality provision may be lawful based on justifications unrelated to the NLRA,” but finding this was not such a case.  Dish Network, LLC, 365 NLRB No. 47 (2017).  He reached the same conclusion in Jack in the Box, 364 NLRB No. 12 (2016), concurring with the majority that a more limited provision treating an arbitration award as confidential was overly broad because it “would preclude all public discussion (with narrow exceptions) of employment-related matters addressed in arbitral decisions, including discussions that constitute concerted activity” while offering no supporting justifications.

Also important are confidentiality directives during workplace investigations.  In Banner Estrella Medical Center, 362 NLRB No. 137 (2015), the Board ruled that to justify a prohibition on employee discussions during ongoing investigations, an employer must demonstrate the need for confidentiality, such as protecting witnesses and evidence, preventing testimony from being altered or fabricated, or preventing a cover up.  The Board, in essence, prohibited blanket rules and required a balance of employer justifications for requiring confidentiality on a case-by-case basis.  Then-Member Miscimarra dissented in that case, and more recently in Dish Network, 365 NLRB No. 47 (2017), arguing that a narrowly tailored nondisclosure request, even if made routinely, always should be considered lawful.  It is not clear whether that view will result in investigation confidentiality directives being treated as categorically lawful in the future, or subject to a case-by-case assessment based on the needs of a given investigation, as under Banner Estrella Medical Center.

In the case of confidentiality rules, some will be categorized as lawful and some unlawful.  Some rules may be assigned to a middle-ground of arguably lawful rules that must be evaluated on a case-by-case basis.  Additional guidance is needed regarding rules that are difficult to categorize and are subject to individualized assessments.  Employers and drafters should keep in mind that in all cases, rules and handbook language that do not reasonably restrict employee rights always will be found lawful, and are likely to provide the best safeguard against administration errors that result in unlawful applications.

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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