Confidentiality and Nondisparagement Clauses in Employment Agreements Must Not Chill NLRA Rights

Authors: Beth P. Zoller and Melissa A. Silver, XpertHR Legal Editors

It appears as if the National Labor Relations Board's (NLRB's) Administrative Law Judges (ALJs) have gotten into the habit of frequently questioning whether employment agreement provisions comply with Section 7 of the National Labor Relations Act (NLRA) and employees' right to engage in protected activity.

In Quicken Loans, Inc. and Lydia E. Garza, Case No. 28-CA-75857, an NLRB ALJ determined that a confidentiality clause and a nondisparagement clause in a mandatory employment agreement for mortgage bankers were overbroad and unlawfully restricted employees from engaging in protected concerted activity under the NLRA. The ALJ ruled that the confidentiality provision, which prohibited employees from disclosing nonpublic information regarding the employer's business or personnel, including personnel lists and employee phone numbers and addresses, to any person, business or entity, violated the NLRA because it prohibited employees from discussing wages and benefits with their fellow employees or union representatives. Further, the ALJ held that the nondisparagement clause, which prevented employees from publicly criticizing, ridiculing, disparaging or defaming the employer or its products, services, policies, directors or officers, could reasonably be interpreted to prohibit employees from criticizing their employer, which Section 7 permits them to do.

The ALJ noted that the line between lawful and unlawful restrictions is "very thin" and the appropriate inquiry is whether the provision would reasonably tend to chill employees in the exercise of their Section 7 rights. In finding these two provisions unlawful, the ALJ ordered the employer to notify all of its mortgage bankers nationwide that these particular provisions in its employment agreement are rescinded.

Part of a Pattern

This decision follows a handful of others handed down from the NLRB as well as NLRB ALJs determining that various workplace policies violate Section 7 and the right of both union and nonunion employees to "engage in concerted activities for the purpose of collective bargaining or other mutual aid or protection." As a result, employers should continue to be vigilant about their employment agreements, employee handbooks and other documents that contain clauses that could be reasonably interpreted as preventing or prohibiting employees from engaging in protected activity and working together to collectively improve their working conditions.