NLRB Limits Confidentiality Agreements

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Beth SlagleBy Beth Slagle

From an employer’s view, a strong employee confidentiality agreement is a smart way to protect the company’s proprietary information and prevent employees from doing anything to publicly harm the company’s reputation.

But an employee might reasonably interpret such an agreement to mean that they can’t talk to their co-workers or others about their working conditions, a right that’s protected under the National Labor Relation Acts (NLRA).

Whether or not the agreement chills an employee’s protected rights comes down to the precise wording of the agreement.  And as an administrative law judge for the National Labor Relations Board (NLRB) admitted in a recent case, the line between protecting the employer and violating employees’ rights is “very thin and often difficult to discern.”
The case started when Quicken Loans sent a notice to several nonunionized employees who had recently left the company to remind them of their “continuing obligations to Quicken Loans,” including the restrictions of the employee confidentiality and non-compete agreements.  A short time later, the employees were sued by Quicken Loans for violating the agreements.

In response, one of the employees filed an unfair labor practice charge with the NLRB, asserting that two of the provisions of the confidentiality agreement violated the NLRA.

One provision in question broadly defined proprietary or confidential information to include information about co-workers and supervisors, such as their personal phone numbers, background information, personal activities and information not related to work.   The other provision prohibited employees from publicly criticizing, ridiculing, disparaging or defaming Quicken, its products, officers, directors or employees.  The provision applied to any comments made on websites, blogs, or emails, even if they were made through the use of a pseudonym.

Quicken Loans argued that because of the considerable time and expense spent training its employees, both provisions were necessary to protect their investment and proprietary information.

While the administrative law judge acknowledged Quicken’s need to protect itself, the judge ultimately ruled that the policy had a chilling effect on employee’s exercise of their rights to discuss the terms and conditions of employment with fellow employees. The judge reminded Quicken Loans that employees are allowed, within certain limits, to criticize their employer and/or its products and appeal to the public to gain their support.

The judge ordered Quicken not only to change its confidentiality agreement, but also to notify employees who had signed it that the two provisions would not be enforced and to tell all employees that it would not prohibit discussion of terms and conditions.

All employers should take a careful look at their confidentiality and other agreements with employees in light of this ruling. Employers who believe that an employee agreement may have been invalidated by the ruling should have employees sign revised agreements. Employers may want to add disclaimers to their policies and agreements stating that no provisions are intended to prohibit or chill employees’ rights to engage in protected activity.

Beth Slagle is an attorney at Pittsburgh-based law firm Meyer, Unkovic & Scott.  She can be reached at bas@muslaw.com.