5th Circuit Affirms NLRB Determination Striking Down Confidentiality Policy

Author: Beth Zoller, XpertHR Legal Editor

April 11, 2014

The 5th Circuit Court of Appeals has affirmed the National Labor Relations Board's (NLRB) determination that an employer's confidentiality policy prohibiting employees from disclosing all company financial and personnel information was overly broad and in violation of the National Labor Relations Act (NLRA). A broadly-worded confidentiality policy could be reasonably interpreted to restrict the rights of employees to discuss their wages and to collectively work to improve their wages, hours and working conditions. An employer seeking to keep business information confidential should narrowly draft and carefully word policy provisions to avoid restricting employees' rights under the NLRA.

In Flex Frac Logistics, L.L.C. v. NLRB, a non-union trucking company required all employees to sign a confidentiality policy. The confidentiality policy prohibited employees from discussing confidential company financial information (including costs, prices, current and future business plans, and computer and software systems and processes) as well as personnel information and documents. The policy also warned employees that they would be disciplined and potentially terminated for disclosing such confidential information.

An unfair labor practice charge was filed by a company employee who was terminated for discussing confidential information. The NLRB found that although the confidentiality policy did not explicitly prohibit the discussion of wages or terms and conditions of employment, the confidentiality policy was unlawful on its face because it was overly broad and contained language that employees could reasonably interpret as restricting them from discussing wages and salaries with co-workers or non-employees.

On appeal, the 5th Circuit agreed that it is well-established law that a workplace rule prohibiting the discussion of confidential wage information between co-workers violates the NLRA. Here, the court upheld the NLRB's determination, concluding that a reasonable person could interpret the confidentiality policy to prohibit employees from discussing wages with both co-workers and non-employees. The court noted that although the confidentiality policy did not expressly prohibit employees from discussing wages, the terms "financial information" and "personnel information" necessarily included wage information. Finally, the court noted that the confidentiality policy provided no indication that certain personnel information (e.g., wages) was carved out of the definition so that employees may be chilled from discussing it.