What you need to know

The First Circuit recently held that an employer’s confidentiality policy prohibiting employees from disclosing the terms of their employment, including their compensation, to “other parties” violated the National Labor Relations Act because it was overly broad.  The employer’s termination of an employee for violating the policy was therefore unlawful as well.

What you need to do

This ruling serves as an important reminder that employee confidentiality provisions must be narrowly drafted to withstand legal challenge.  Your company’s confidentiality provisions should be tailored accordingly.

In National Labor Relations Board v. Northeastern Land Services Ltd., the First Circuit held that Northeastern Land Services, Ltd. violated the NLRA by terminating its employee Jamison Dupuy for violating a confidentiality provision in his employment agreement.  NLS is a temporary employment agency that supplies workers to clients but pays its workers directly.  Before NLS placed Dupuy with clients, it required him to sign temporary employment contracts that said, in relevant part:  “Employee…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.”

A dispute arose between NLS and Dupuy over his pay.  Part of the issue concerned Dupuy’s reimbursement for the work-related use of his personal computer.  After several emails had gone back and forth between Dupuy and NLS, Dupuy added the client to the email string and asked the client to help with the reimbursement.  NLS then terminated Dupuy, asserting that he had violated the confidentiality provision of his employment agreement by sharing details of his compensation with the client.

The First Circuit focused on the NLRA’s requirement that all employees, whether union or nonunion, must be permitted to engage in “protected concerted activity.”  This broad concept includes employees’ right to discuss terms and conditions of employment with each other, as well as with unions that represent them or are attempting to organize them.  The court found that NLS’ broad prohibition against employees’ disclosure of the terms of their employment had a “chilling effect” on their right to engage in such a protected activity.

The court emphasized that employers remain free to prohibit the disclosure of confidential and proprietary information through narrowly drawn confidentiality provisions.  At the same time, its ruling makes clear that a blanket prohibition against disclosure of employees’ terms and conditions of employment will almost certainly be viewed as overbroad and unenforceable.  Any discipline imposed against an employee for violating such an overly broad provision will therefore also run afoul of the NLRA.

The First Circuit’s decision serves as a timely reminder that employees’ rights to discuss the terms and conditions of their employment may be broader than you expect.  As you may recall from an earlier Choate Alert, the NLRB’s ruling that an employee’s Facebook posting regarding employment conditions could be protected activity under the NLRA is a recent decision in this same vein.  While you can and should protect your company’s confidential information, be mindful that your confidentiality policy should be tailored so it does not unlawfully prohibit protected activity.