Law360, New York (November 30, 2016, 11:57 AM EST) - Employee handbook policies on confidentiality and social media have been written, rewritten, and rewritten again in the past few years. By the time the new handbook is rolled out to the workforce, a new ruling or agency guidance alters the scope of permissible restriction on employee conduct, including sharing of confidential information — particularly in relation to wages and terms and conditions of employment. The primary agency directing these changes has been the National Labor Relations Board. In recent months, however, other agencies not traditionally involved in the labor and employment realm have issued guidance that impacts future iterations of handbook and code of conduct policies. Along with the guidance comes substantially higher consequences for failure to comply, including potential criminal prosecution.
On 20 October 2016, the U.S. Department of Justice and Federal Trade Commission sent a shiver down the spines of HR professionals when they issued antitrust guidance specifically targeted at the HR community and others involved in hiring and compensation decisions. The guidance warns of criminal prosecution against companies, HR professionals and other individuals for formal and informal wage-fixing or no-poaching agreements between companies, which can occur by sharing wage information with other competitive entities. The agencies also encourage rapid reporting of potential antitrust violations.
While the new guidance covers both anti-poaching and wage fixing arrangements, the focus of this article relates to wage-fixing and the extent to which employees may share wage information. In particular, the FTC/DOJ guidance sets forth the following wage-related principles:
- Any company, acting on its own, may make decisions regarding hiring, soliciting or recruiting employees, but should not communicate its policies or decisions with other companies hiring the same types of employees.
- Sharing hiring information among competing employers may be illegal when the exchange of information is likely to have an anti-competitive effect. Interactions with other employers, therefore, must not result in an agreement not to compete for employees or to fix particular terms of employment, such as offered wages and benefits.
The general idea of the guidance as it relates to wages is that employers should not share specific wage data that could lead to market collusion to reduce wages (setting a fixed market wage depriving employees of the benefits of market competition for their services). Much of the guidance relates to ways to make wage data more opaque, such as sharing data aggregated across multiple employers, multiple job classifications or through plain redaction. While the guidance is targeted at HR professionals, the broad scope implies that it would be equally effective as a prohibition on any employee who shares sensitive wage information in a public forum. Given the enormity of the potential criminal consequences, a broad view of application is certain to be the prevailing approach from HR professionals.
In contrast to the DOJ and FTC joint guidance, the NLRB has favored transparency of wage and other information relating to terms and conditions of employment. The NLRB and FTC/DOJ goals are roughly the same — to give employees more ability to negotiate better wages and terms of employment. The means, however, are starkly different. Rather than keeping employers anxious that another employer may offer a better deal to their high performers (the DOJ/FTC route), the NLRB's position is that greater gains can be made if employees are able to unite together (with or without a union) to fight for a better deal. To empower that movement, employees need information. In other words, it is the difference between relative secrecy and broad disclosure.
In support of its mission, the NLRB has repeatedly found unlawful employer confidentiality policies that prohibit employees from discussing wage information and other terms and conditions of employment (more information here). Social media policies are also prime candidates for enforcement, as employers often add additional confidentiality restrictions specifically tailored for the broadly distributed forum of social media. As a result of the NLRB rules in particular, the common approach to recent employer handbook rewrites has been to follow the NLRB's guidance suggesting lawful alternatives. Each alternative proposed by the NLRB, however, leaves the door open (or at least mostly ajar) for employees to share wage information with whomever they choose, including competitive employers.
Also in the spirit of broader disclosure and transparency, in 2016, the U.S. Department of Defense, NASA and the Pentagon proposed rules to prohibit federal contractors from having confidentiality policies that bar employees from blowing the whistle on waste, fraud or abuse. The prohibited policies would naturally extend to the sharing of wage information.
Similarly, by executive order dated April 8, 2014 (aptly named "Non-Retaliation for Disclosure of Compensation Information"), President Obama added a new protection to federal contractor employee disclosure of wage information: "The contractor will not discharge or in any other manner discriminate against any employee or applicant for employment because such employee or applicant has inquired about, discussed, or disclosed the compensation of the employee or applicant or another employee or applicant." Fortunately, the executive order excludes such protection in situations where the employee obtains the data in connection with the essential functions of the employee's position, leaving the ability to place some restraint on mass disclosure by an employee who may not be a supervisor (and who is protected by the NLRA).
In short, while the DOJ and FTC essentially say, "Don't let wage information get to competing employers or we may criminally prosecute you and/or your company," the NLRB says, "You may not restrict employees fromsharing wage information."
This conflict puts HR professionals on the horns of a dilemma when crafting handbook policies and procedure manuals and enforcing those rules in the workplace. What's the solution? Waiting to see how a new administration will direct agency guidance may not be sufficient, given the consequences of unlawful disclosure. One approach is to slightly recraft policies relating to confidential information and social media, considering the below alternatives:
- Create different confidentiality policies for supervisors and non-supervisors. The National Labor Relations Act only applies to non-supervisory employees. Accordingly, most HR professionals, hiring managers, and others with access to wide swaths of employee wage information are not covered by the NLRB's guidance, and can be lawfully prohibited from sharing wage information with competing employers. Specific supervisory rules, therefore, could address most situations covered by the FTC and DOJ's new guidance recommending confidential treatment of wage and benefit information. A possibility still exists, however, that a non-supervisory employee (perhaps a payroll clerk) would have access to sensitive wage information and who would be protected by the NLRA. Those employees would potentially place themselves and the company at risk of antitrust action in the event wage information is shared publicly or with competing employers and in a manner that permitted wage-fixing. All employees should be allowed to share information with government agencies.
- Prohibit wage and benefit information sharing that may create antitrust risk (i.e., where a competing employer may access the data). The NLRB's rationale for allowing employees to share wage information and other terms and conditions of employment is to avoid a chilling effect on NLRA Section 7 protected activity, including discussion of wages, hours and conditions of employment with fellow employees, as well as with non-employees, such as union representatives. Certain confidentiality provisions are allowable so long as employees do not reasonably understand the rule to prohibit Section 7 protected activity. Rarely, if ever, will Section 7 protection extend to disclosure to employees of other competitive employers. Therefore, so long as the confidentiality policies are limited to disclosure that is specific enough to identify the individual employer and available for competing employers, the NLRB would be hard-pressed in claiming the policy could cause a chilling effect on Section 7 activity. Such a policy may allow employers to prohibit posting of wage scales on unrestricted websites, for example.
This new DOJ and FTC joint guidance marks a call to action for employers, tempered by the NLRB's possibly conflicting historical guidance and the recent contracting government agency guidance. Employers should immediately address this guidance in the following ways:
- Address the FTC and DOJ guidance first with antitrust counsel. The penalties and consequences are far more substantial for noncompliance with antitrust guidelines than with NLRB guidance.
- Consider strict data sharing policies on non-supervisory employees, particularly those with access to sensitive wage information.
- Conduct compliance training for recruiting managers, hiring managers, and HR professionals to ensure that individuals responsible for hiring decisions understand the potential pitfalls, and do not inadvertently share information.
- Ensure that company HR guidelines and policies are consistent with the new agency guidance. Consider amendments to confidentiality and social media policies to place additional restrictions on employee information sharing where it presents the risk of antitrust violations.