In Northeastern Land Services, Ltd. v. National Labor Relations Board, the First Circuit affirmed a National Labor Relations Board (NLRB) decision that a non-unionized employer violated federal labor law by including in its employment contracts a provision that prohibited workers from disclosing the terms of their employment, including their compensation.

In 2001, Northeastern Land Services (NLS) assigned temporary worker James Dupuy to a project for one of its clients, El Paso Energy. In accepting the assignment, Dupuy was required to sign NLS’s temporary employment agreement, which contained a confidentiality provision that prohibited him from disclosing the terms of his employment – including his compensation – to “other parties.” While Dupuy was engaged in the El Paso Energy project, a number of disputes developed between Dupuy and NLS regarding his compensation and expense reimbursements. After failing to obtain a satisfactory resolution from NLS, Dupuy contacted a supervisor at El Paso Energy regarding his complaints. When NLS learned of Dupuy’s communication with El Paso Energy, the company fired him for violating the agreement’s confidentiality provision.

Following his termination, Dupuy filed an unfair labor practice charge with the NLRB, alleging NLS had violated Section 7 of the National Labor Relations Act by maintaining an overly broad confidentiality provision and terminating him for breach of that unlawful provision. Section 7 guarantees all employees the right to discuss wages and other working conditions with each other, with labor unions, and with other outside resources. An Administrative Law Judge (ALJ) dismissed the complaint, but a two-member panel of the NLRB reversed the ALJ’s decision. The NLRB reasoned that because employees could reasonably interpret the confidentiality provision to prohibit them from discussing their employment conditions with union representatives, it was unlawfully broad. The NLRB also held that NLS’s imposition of discipline pursuant to the overbroad policy constituted an unfair labor practice.

In upholding the NLRB’s determination, the First Circuit found that the NLRB’s rule invalidating any provision that plausibly may be interpreted to restrict Section 7 rights, regardless of the manner in which the provision is actually applied, is consistent with the NLRB’s prior precedent and is therefore reasonable. The Court also found that the NLRB was not required to engage in the type of balancing test advocated by NLS regarding its justification for the confidentiality provision. Finally, the Court noted that “a more narrowly drafted provision would be sufficient to accomplish NLS’s goal.”

This case serves as an important reminder to employers of the risk associated with maintaining and enforcing broad confidentiality clauses. Such provisions must be drafted as narrowly as possible to avoid impinging upon employees’ Section 7 rights, even in non-union settings.