Seyfarth Summary: The relevance of the National Labor Relations Act to industries and business sectors that have not traditionally had to deal with its implications – such as hedge funds.

The New York Times recently ran on the front page of its business section a lengthy article discussing the National Labor Relation’s Board challenge to a number of provisions of an employment agreement that Bridgewater Associates, the world’s biggest hedge fund firm, requires each full-time employee to sign. Under the headline Confronting Wall Street’s Secretive Culture – N.L.R.B. Challenges Confidentiality Clauses, the article notes that the Board is challenging Bridgewater’s confidentiality, non-disparagement, and arbitration clauses and went on to state “[t]he unusual action is calling into question longstanding practices and prompting some companies to re-examine their employment agreements.”

With all deference to The Times, however, for a number of years the Board has been finding confidentiality provisions (see e.g., Target Corporation, 359 NLRB No. 103 (2013)) and non-disparagement clauses (see Dish Network Corporation, 359 NLRB No. 108 (2013)) unlawful and has steadfastly maintained, despite much criticism from the courts, that clauses restricting employees to arbitrating disputes are unlawful (D. R. Horton, Inc., 357 NLRB 184 (2012)). If anything is “unusual” – if unsurprising – it is that the Board is going after a hedge fund.

Although many employers (and some of their attorneys) think that the application of the National Labor Relations Act is limited to union-represented employees or at least limited to union or union-related activities, such as collective bargaining, union organizing, or union strikes, hand billing, picketing, or boycotts, the Act’s coverage is much broader. As the Board’s website notes:

  • The NLRA applies to most private sector employers, including manufacturers, retailers, private universities, and health care facilities.
  • Employees at union and non-union workplaces have the right to help each other by sharing information, signing petitions and seeking to improve wages and working conditions in a variety of ways.See NLRB Website: FAQ’s.

The Complaint against Bridgewater (Case Number: 01-CA-169426 (06/30/2016)) is not the first one in the financial sector. For example, as Seyfarth Attorney Ashley Laken noted, the D.C. Circuit recently upheld the Board’s finding that the confidentiality and non-disparagement provisions of Quicken Loan’s employment agreements (see our earlier blog post here) violated the Act.

Confidentiality agreements, for example, can be drafted to lawfully prohibit the disclosure of a wide variety of confidential information, see e.g., GC MEMORANDUM OM 12-31, Case 7 (pp. 17-18) (a rule by a drugstore chain prohibiting the disclosure of confidential information lawful where the rule was clearly in the context of not disclosing personal health information); see also GC MEMORANDUM OM 12-59, p. 20 [Walmart, Case 11-CA-067171] (finding lawful a rule requiring employees to maintain the confidentiality of the employer’s trade secret and confidential information where rule was sufficiently contextualized by examples of prohibited disclosures (i.e., information regarding the development of systems, processes, products, know-how and technology, internal reports, policies, procedures or other internal business-related communications) for employees to understand that it does not reach protected communications about working conditions).

It seems reasonably clear, however, that too often the implications of the NLRA for industries and sectors that have not traditionally had to deal with issues arising under the Act are not considered. Further, even where they are at least considered, frequently all that is done is to include a so-called “savings clause,” stating in effect that nothing contained in an employment agreement, handbook, or work rule, shall be construed as restricting activity protected by the National Labor Relations Act. The Board, however, routinely finds such clauses ineffective. Chipotle Services LLC d/b/a Chipotle Mexican Grill, 364 NLRB No. 72 (2016); see also ISS Facility Services, Inc., 363 NLRB No. 160 (2016).

As noted, the National Labor Relations Act applies to most private sector employers, including industries and business sectors that have not traditionally had to deal with issues arising under its provisions. However, because it provides for only compensatory damages and generally does not offer the opportunity for attorney’s fees, it has generally been ignored by the Plaintiff’s Bar. But in today’s digital age, where employees can readily become aware of the Act’s scope via social media and online content providers, the Act’s implications need to be considered by almost all private sector employers when drafting employment agreements, handbooks, and work rules – areas into which the Board clearly is looking to expand its effective reach.