A recent decision from the National Labor Relations Board reminds non-unionized employers of the potential risks associated with broad confidentiality provisions that prohibit employees from discussing the terms and conditions of their employment. In Northeastern Land Services, Ltd., the Board found that a non-unionized temporary employment agency violated federal labor law by including in employment contracts a confidentiality provision that prohibited temporary workers from disclosing the terms of their employment, including compensation, to other parties.

In 2001, Northeastern Land Services (NLS) assigned Jamison Dupuy to a project undertaken by one of its clients, El Paso Energy. NLS required Dupuy to sign its temporary employment agreement, which included the following confidentiality provision: “Employee also 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.” During the El Paso Energy project, Dupuy experienced several issues with his compensation and expense reimbursements. He complained first to NLS, but when the problems were not resolved, he took his complaint directly to El Paso Energy’s project manager. NLS terminated him for failing to comply with the confidentiality provision by disclosing his terms of employment to another party.

Dupuy filed an unfair labor practice charge with the Board, asserting that his termination violated Section 7 of the National Labor Relations Act (the Act) because it arose from the enforcement of an overly broad confidentiality provision. Section 7 protects the rights of both union and non-union employees to discuss their wages and other working conditions with each other, labor unions, and other outside sources, including customers. An employer must have a legitimate business reason to restrict these rights. Even if a policy does not explicitly restrict Section 7 activity, it is nonetheless unlawful if employees would reasonably construe the language of the rule to prohibit Section 7 activity. The Administrative Law Judge dismissed the complaint, finding that the confidentiality agreement did not prohibit employees from discussing their terms and conditions of employment with one another, and that although it did restrict disclosure of such terms to third-party clients, NLS had a legitimate business reason for the restriction.

On appeal, the Board reversed the decision, finding that the confidentiality provision was overly broad and violated the Act because the provision, by its clear terms, precluded employees from discussing compensation and other terms of employment with “other parties.” According to the Board, an employee reasonably could construe the language as restricting Section 7 activity by prohibiting discussions with union representatives regarding such matters. Because an employer’s imposition of discipline pursuant to an unlawfully overbroad policy constitutes a violation of the Act, the Board ordered NLS to offer Dupuy reinstatement and to make him whole for his loss of earnings and benefits over the previous seven years.

This decision serves as a reminder that the Act applies to both unionized and non-unionized workplaces. To avoid liability under the Act, all employers should carefully review employment agreements, employee handbooks, and other personnel policies that include confidentiality provisions restricting employees’ rights to discuss their terms and conditions of employment to ensure that such restrictions are well-defined and narrowly-tailored.