NLRB Again Finds Confidentiality Policies Unlawful

[Omaha Steve]

http://www.mondaq.com/article.asp?articleid=63150

09 July 2008
Article by Andrew P. Marks and Hans Tor Christensen

Staffing companies typically seek to limit their employees from addressing pay and benefit issues to the client company. Among other reasons, staffing companies may feel that clients do not want to hear compensation complaints from temporary workers, nor do clients want such workers sharing salary information with the client's regular employees. The NLS Group was trying to accomplish these purposes by including the following clause in its Temporary Employment Agreement:

Employee understands that Employee will have direct access to and contact with NLS' various clients as Employee performs services hereunder and Employee agrees to keep all information obtained or utilized in the course of performing its services strictly confidential. Employee agrees not to solicit work or accept assignments from any of NLS's clients directly while engaged in services hereunder, or for a period of six (6) months after the termination of this agreement. Employee also understands that the terms of this employment, including compensation, are confidential to Employee and the NLS Group. Disclosure of these terms to other parties may constitute grounds for dismissal.

Reasonable? Yes. But unlawful, says the National Labor Relations Board in Northeastern Land Services, Ltd. d/b/a The NLS Group, 352 NLRB No. 89 (June 27, 2008), and the employee fired in 2001 for violating this policy is now entitled to reinstatement with years of back pay.

The fact that NLS employees were not represented by a union is irrelevant to this situation. Confidentiality concerns under the National Labor Relations Act (NLRA) can arise in any workplace. Here, the NLRB held that employees of the staffing company would reasonably understand the above clause to prohibit them from discussing the terms and conditions of their employment with a union organizer – conversations that are protected by the NLRA. Because the NLS rule was unlawfully overbroad, the termination pursuant to the rule was also unlawful, even though there was no evidence that the terminated employee actually sought to discuss his wages with a union or even with his coworkers.

The Administrative Law Judge who initially decided the case in 2002 concluded that the contract clause did not prohibit employees from discussing their contract terms with one another. While it did prohibit such discussions with clients, that limitation was justified because temporary staffing is "a very competitive industry, and the wages and reimbursements that provides to its employees comprise a significant portion of the bids that it submits to potential clients." The ALJ found this to be a legitimate and substantial business justification that outweighed the possible restriction on employee rights. Now, six years later, the current two-member Board overruled the ALJ concluding that the Temporary Employment Agreement's prohibition on the discussion of compensation with "other parties" would reasonably be read by employees to include a "union organizer" and, therefore, was impermissibly overbroad. Perhaps, had the employer substituted "NLS clients" for "other parties" – rather than rely on the context of the entire paragraph - it would not now be facing six years of back pay.
A Continuing Trend

In Martin Luther Memorial Home d/b/a Lutheran Heritage Village-Livonia, 343 NLRB No. 75 (2004), the Board articulated a standard for determining whether an employer's handbook or work rule violates the NLRA: If the rule explicitly restricts protected activity, it is unlawful. If the rule does not explicitly restrict protected activity, it is nonetheless unlawful if: (1) employees would reasonably construe the language of the rule to prohibit protected activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of rights guaranteed by the NLRA.

Since Lutheran, the NLRB has heard several other cases challenging handbook policies and work rules. See, for example, Claremont Resort and Spa, 344 NLRB No. 105 (2005) (employees would reasonably read employer's rule prohibiting "negative conversations" about their managers as an unlawful prohibition on voicing complaints) and Longs Drug Stores California, Inc., 347 NLRB No. 45 (2006) (work rules against disclosure of confidential information deemed unlawful because employees would reasonably believe such work rules prohibit disclosure of employee wage rates).

FULL story at link.