Employers who seek to protect their confidential business information and their reputations by requiring employees to sign employment agreements containing confidentiality and non-disparagement clauses may now face opposition from the National Labor Relations Board (NLRB).
Executive Summary: Employers who seek to protect their confidential business information and their reputations by requiring employees to sign employment agreements containing confidentiality and non-disparagement clauses may now face opposition from the National Labor Relations Board (NLRB). In Quicken Loans (January 8, 2013), an ALJ in the NLRB's Phoenix region held that such clauses violate section 8(a)(1) of the National Labor Relations Act (NLRA) because they tend to chill employees' exercise of their Section 7 rights.
In analyzing this issue, the ALJ conceded that the "line between lawful and unlawful restrictions is very thin and often difficult to discern." He concluded, however, that Quicken Loans' proprietary/confidential information and non-disparagement clauses fell on the wrong side of that line. With regard to the proprietary/confidential information provision, the ALJ noted that the clause's prohibition on disclosure of "non-public information relating to . . . the Company's business, personnel . . . all personnel lists, personal information of co-workers . . . personnel information such as home phone numbers, cell phone numbers, addresses and email addresses" would hinder employees' exercise of their Section 7 rights. In complying with the proprietary/confidential information provision, employees would be unable to "discuss with others, including their fellow employees or union representatives, the wages and other benefits that they receive, the names, wages, benefits addresses or telephone numbers of other employees." The ALJ further held that the non-disparagement provision would chill Section 7 rights as there "can be no doubt that an employee reading these restrictions could reasonably construe them as restricting his rights to engage in protected concerted activities" such as criticizing his employer or appealing to the public or fellow employees for support.
Although a company official testified that, in his recollection, no employee had ever been disciplined for violating the proprietary/confidential information or non-disparagement provisions, the ALJ concluded that their mere existence violated the Act. The company likely will appeal the ALJ's decision, but in the meantime, employers nationwide may experience new concerns about their own confidentiality and non-disparagement provisions and may wish to review these provisions with experienced employment law counsel.
If you have any questions regarding this Alert or other labor or employment law issues, please contact the author, Jaclyn West, jwest@fordharrison.com, who is an attorney in our Washington, DC office, or the FordHarrison attorney with whom you usually work.