Confidentiality Provision May Violate Federal Labor Law

NLRB Holds Workers Could Construe Prohibition As Restricting Discussions With Union

The National Labor Relations Board (NLRB) recently held that a temporary employment agency violated federal labor law by including a confidentiality provision in the employment contract between the agency and a temporary worker, and by terminating the worker for violating that provision. The NLRB held that the provision was unlawful because employees reasonably could construe it as restricting discussions with union representatives. This decision is important because the National Labor Relations Act (NLRA) prohibits work rules that restrict discussion of wages or working conditions among employees or with a union, or rules which might “reasonably be construed” to restrict such discussions. Northeastern Land Services, Ltd. d/b/a The NLS Group and Jamison John Dupuy, 352 NLRB No. 89 (June 27, 2008).

Factual Background

Jamison Dupuy was employed as a right-of-way agent by Northeastern Land Services (NLS), a temporary employment agency. His duties included performing various activities related to acquisition of land rights for companies in the natural pipeline and fiber optic telecommunication industries.

In July 2001, Dupuy was assigned to a project at El Paso Energy. Prior to beginning the assignment with El Paso, NLS required Dupuy to sign its temporary employment agreement. The agreement included the following confidentiality provision: “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.”

During the course of the El Paso project, Dupuy experienced delays in receiving his pay. Because he felt that NLS was not helping him to resolve the problem, Dupuy told NLS that he was going to raise the issue directly with El Paso. Ultimately, Dupuy did contact El Paso, raising the late payment issue as well as another compensation issue related to reimbursement for the use of his personal computer. He also sent NLS a follow-up e-mail on which he copied El Paso, mentioning the computer issue.

NLS then terminated Dupuy’s employment, stating that he had “not lived up to [his] end of the bargain.” Specifically, he failed to comply with the confidentiality provision of his employment agreement by discussing compensation issues with El Paso. Dupuy later filed an unfair labor practice charge challenging the termination.

Legal Analysis

Dupuy’s claim was first heard by an administrative law judge (ALJ), who dismissed the complaint. The ALJ held that the confidentiality provision did not restrict NLS’ employees from discussing the terms of their employment with one another. In addition, the ALJ found that although the provision did restrict the employees’ right to discuss terms and conditions of employment with third parties, NLS had provided a legitimate business justification that outweighed this restriction on employees’ rights. The company stated that it is engaged in a very competitive industry in which confidentiality of such terms and conditions is critical. Because the confidentiality provision was not unlawful, the ALJ held, NLS did not violate the NLRA when it terminated Dupuy’s employment.

The NLRB reversed the ALJ’s decision, concluding that the confidentiality provision was unlawful because employees reasonably could construe the language – which precluded discussions of compensation and other terms of employment with “other parties” – as prohibiting discussion with union representatives about those issues. Further, because an employer’s imposition of discipline pursuant to an unlawful policy constitutes a violation of the NLRA, Dupuy’s termination was found by the NLRB to have been unlawful.

Based upon its findings, the NLRB ordered injunctive relief that included rescission of the confidentiality language in the NLS agreements, reinstatement of Dupuy, and deletion of all references of his termination from his personnel file. In addition, NLS was ordered to “make Jamison Dupuy whole for any loss of earnings and other benefits” caused by its actions.

Practical Impact

Employers that routinely include confidentiality language in employment agreements and employee handbooks should periodically review that language to ensure that it cannot be interpreted as precluding employees from discussing compensation or other employment terms and conditions with union representatives. Such interpretation can create unintended liability for employers under the NLRA.

Note: This article was published in the July/August 2008 issue of The Employment Law Authority.