The National Labor Relations Board correctly found a company’s confidentiality policy that could be interpreted to restrict employees’ dissemination of information about compensation, among other things, to individuals outside the company, violated the National Labor Relations Act, according to the U.S. Court of Appeals for the Fifth Circuit in New Orleans. Flex Frac Logistics, L.L.C. v. National Labor Relations Board, No. 12-60752 (5th Cir. Mar. 24, 2014), enf., Flex Frac Logistics LLC, 358 NLRB No. 127 (2012). The Fifth Circuit has jurisdiction over Louisiana, Mississippi, and Texas.

The confidentiality clause at issue stated:

Confidential Information

Employees deal with and have access to information that must stay within the Organization. Confidential Information includes, but is not limited to, information that is related to: our customers, suppliers, distributors; Silver Eagle Logistics LLC organization management and marketing processes, plans and ideas, processes and plans, our financial information, including costs, prices; current and future business plans, our computer and software systems and processes; personnel information and documents, and our logos, and art work. No employee is permitted to share this Confidential Information outside the organization, or to remove or makes copies of any Silver Eagle Logistics LLC records, reports or documents in any form, without prior management approval. Disclosure of Confidential Information could lead to termination, as well as other possible legal action.

Focusing on the policy’s use of the expressions, “financial information, including costs” and “personnel information,” which it, like the NLRB, interpreted as encompassing wage information, the Court noted that a “workplace rule that forb[ids] the discussion of confidential wage information between employees . . . patently violate[s] [the NLRA].”

The Court, as did the Board, concentrated on whether employees could reasonably construe the language in the policy to prohibit the discussion of wages and other terms of employment with outside parties (including unions), activity that is protected by the NLRA. Rejecting the company’s argument to the contrary, the Fifth Circuit agreed with the NLRB’s conclusion that employees could so reasonably construe the policy. That the NLRB had reached this result even though the confidentiality clause did not specifically refer to wages or other terms of employment did not impugn the validity of its conclusion, the Court determined; notably, no language in the policy excluded these subjects from the apparent reach of the prohibition on disclosing “financial information, including costs.” Indeed, the ban on discussing “personnel information” could extend to communications involving other protected subjects. 

The employer’s argument that the NLRB’s decision was not supported by substantial evidence also was rejected. Its reliance on evidence that employees discussed wages among themselves and with management and that recruiters discussed wage information with current and prospective employees was misplaced, according to the Court. No evidence was presented by the employer that employees discussed their wages with non-employees

The employer also argued that its employees did not interpret the confidentiality provision to restrict their rights. The Court, however, said that the practice of employees is not determinative. The appropriate inquiry, it said, was whether “employees would reasonably construe the [disputed] language to” bar protected conduct. 

Employers should review their policies and procedures now and regularly – before the onset of union organizing, election proceedings, and unfair labor practice cases, where problematical language in policies can result in adverse consequences.