Regardless of whether your workforce is non-union or union, your workplace policies and rules may be in violation of the National Labor Relations Act (NLRA). If employees could reasonably construe a policy as restricting their right “to self-organization, to form, join, or assist labor organizations . . . and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection . . .,” the policy could violate Section 7 of the NLRA. A recent decision issued by the U.S. Court of Appeals for the Fifth Circuit in Flex Frac Logistics LLC, et al. v. National Labor Relations Board held that a non-union employer’s confidentiality policy violates Section 7 of the NLRA. Flex Frac Logistics LLC (Flex Frac), which was a joint employer with another non-union entity, operated a non-union trucking company in Fort Worth, Texas. Flex Frac employees were required to sign an at-will employment agreement that contained a confidentiality rule prohibiting disclosure of confidential information, including “financial information, including costs, prices” and “personnel information and documents.”

After a Flex Frac employee was discharged for violating the confidentiality rule by disclosing customer contract prices, the employee filed an unfair labor practice charge with the National Labor Relations Board (NLRB) alleging that the confidentiality rule was unlawful in that it restricted her right to engage in activities protected by Section 7 of the NLRA. An Administrative Law Judge (ALJ) for the NLRB held that Flex Frac’s confidentiality rule violated the NLRA because it was overbroad and unlawfully prohibited employees from discussing wages with individuals outside of the company. Additionally, the ALJ held that Flex Frac violated Section 8(a)(1) of the NLRA by terminating the employee pursuant to the unlawful confidentiality rule, even though the employee was not terminated for discussing wages or for engaging in protected activity.

In a 2-1 decision, the NLRB affirmed the ALJ’s ruling that the confidentiality provision was overbroad and therefore violated the NLRA. Because the employer’s rule generally prohibited discussion of “financial information” and “personnel information,” the NLRB held that Flex Frac’s employees could “reasonably believe that they are prohibited from discussing wages or other terms and conditions of employment with nonemployees, such as union representatives – an activity protected by Section 7 of the Act.” The NLRB concluded that the presence of such “sweeping nonexhaustive categories” in the confidentiality rule perpetuated “employees’ reasonable impression that they would face termination if they were to discuss their wages with anyone outside of the company.”

The NLRB did, however, disagree with the ALJ’s ruling that the discharge violated the NLRA and instead held that a discharge pursuant to an unlawful confidentiality rule will only violate the NLRA if the employee actually engaged in protected activity or engaged in conduct that “implicates the concerns underlying Section 7 of the Act.” The termination issue was remanded back to the ALJ. Flex Frac appealed the NLRB’s holding regarding the unlawfulness of the confidentiality rule to the Fifth Circuit.

On appeal, the Fifth Circuit agreed with the NLRB’s holding that the confidentiality rule is unlawful. Flex Frac argued that there was no evidence that it had enforced the confidentiality rule in such a manner as to prohibit employees from discussing wages with individuals outside of the company, or that Flex Frac’s employees actually interpreted the rule as prohibiting disclosure of information related to wages. Nonetheless, the court held that such evidence was not necessary to uphold the NLRB’s order. Instead, the court concluded that Flex Frac’s confidentiality rule failed to adequately identify the categories of “personnel information” covered by the rule, and similarly failed to include any limitation on the type of “personnel information” that was prohibited by the rule. Thus, because it implicitly prohibited the discussion of wage information, the confidentiality rule violated the NLRA.

Flex Frac serves as an important reminder that even non-union employers are subject to certain provisions of the NLRA. Confidentiality policies and requirements should be narrowly tailored to ensure that the rules cannot be read as prohibiting employees from discussing wages or terms and conditions of employment with other employees or individuals, such as union representatives, outside of the company. Whether unionized or not, employers with agreements or policies that contain broad confidentiality and non-disclosure rules, with only general language prohibiting the disclosure of confidential personnel information, may want to review them for compliance with Section 7 of the NLRA. For additional information about this decision, please contact any member of Schiff Hardin’s Labor and Employment Group.