NLRB Snags Another Non-Union Employer with Confidentiality Provision in Employment Agreement.

Late last month, the NLRA concluded that a temporary agency twice violated the National Labor Relations Act when it discharged an employee for breaching an unlawful term in his employment agreement requiring him to maintain the confidentiality of the terms of his compensation. Northeastern Land Services, Ltd. d/b/a The NLS Group and Jamison John Dupuy, Case 1–CA–39447 (NLRB 6/27/08).

The employer temporary agency leased employees to third parties. There is no indication that either the temporary agency employer or its client employers were unionized. The temporary agency employer allegedly violated Section 8(a)(1) of the NLRA “by maintaining in its employment contracts an overbroad confidentiality provision and by terminating [the complaining] employee . . . for breaching that confidentiality provision.” In particular, the temporary agency required its employees to sign an employment which contained the following clause: “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.” The clause did not limit the confidentiality obligation to disclosing the information to competitors or clients, and thus, could unlawfully encompass unions.

After he began work, the employee began to experience problems with getting paid in a timely manner. After complaining to the temporary agency, he also complained to the leasing employer. In addition, the leasing employer had promised him a daily stipend for using his personal laptop at work, but when the temporary agency indicated that it planned to reduce this stipend, the employee objected to both the leasing employer and the HR Coordinator of the temporary agency. He also asked the leasing employer to retain him through another temporary agency if these problems could not be resolved and then refused to bring his laptop to the job site any longer.

The temporary agency CEO then notified the employee that they felt that they had done enough to accommodate him, that nothing would make him happy and that he was being terminated. When he objected (on the grounds he had engaged in protected conduct by filing a complaint with a state agency), the CEO responded that the employee had “not lived up to [his] end of the bargain” in that he had failed “to comply with his contractual agreement—i.e., the confidentiality provision in the temporary employment agreement—not to disclose the terms of his employment to outside parties.”

The NLRB articulated its standard for determining the validity of work rules under the NLRA. “If the rule explicitly restricts Section 7 activity, it is unlawful. If the rule does not explicitly restrict Section 7 activity, it is nonetheless unlawful if (1) employees would reasonably construe the language of the rule to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of Section 7 rights. In applying these principles, the Board refrains from reading particular phrases in isolation, and it does not presume improper interference with employee rights.” (citations omitted).

In this case, the confidentiality provision in the temporary agency’s employment agreement “is unlawful because employees reasonably would construe it to prohibit activity protected by Section 7. Specifically, . . . the provision, by its clear terms, precludes employees from discussing compensation and other terms of employment with ‘other parties.’ Employees would reasonably understand that language as prohibiting discussions of their compensation with union representatives.” Therefore, “the confidentiality provision is unlawfully overbroad at least in this respect, in violation of Section 8(a)(1).”

“Under extant Board precedent, an employer’s imposition of discipline pursuant to an unlawfully overbroad policy or rule constitutes a violation of the Act.” Because the employee was fired to violating “an unlawfully overbroad” rule, his termination was also a separate violation of the NLRA.

The Board then ordered the temporary agency to rescind the confidentiality provision from its employment agreements and other publications, to re-hire the employee to the same or substantially similar job with full back pay and benefits, to eliminate any references in its records to the discharge of the employee, to post a standard notice of its NLRA violation and to mail a notice “to all current and former employees employed by the [temporary agency] under its temporary employment agreement (including but not necessarily limited to its right-of-way agents) since July 23, 2001, the date from which the complaint alleged and we have found that the [temporary agency] maintained the overbroad confidentiality provision in its temporary employment agreement.”

Insomniacs can read the full decision at http://www.nlrb.gov/research/decisions/board_decisions/template_html.aspx?file=http://www.nlrb.gov/shared_files/Board%20Decisions/352/v35289.htm&size=147.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.