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August 30, 2011

Does Your Confidentiality Policy Violate The National Labor Relations Act?

Many employers have a policy that employees should not disclose information concerning their compensation to third parties, even co-employees. The National Labor Relations Board ("NLRB") has taken that position that such a policy is unlawful because employees would reasonably construe such a policy as to prohibit activities protected by Section 7 of the National Labor Relations Act ("NLRA"). In NLRB v. Northeastern Land Services Ltd., 2011 U.S. App. LEXIS 12678 (1st Cir. June 22, 2011), the First Circuit enforced an NLRB order finding that Northeastern Land Services had violated the NLRA by adopting a policy that prohibited employees from discussing the terms of their compensation with third parties. The Board also found that Northeastern Land Services violated the NLRA by terminating an employee who violated the rule. There are three important lessons to take from the Court's decision.

First, it is significant to note that the unfair labor practice charge filed with the NLRB in Northeastern Land Services was filed by a single employee. There was no union involved nor was there any allegation that the employee was engaged in concerted protected activity, that is, attempting to enforce rights on behalf of anyone else.

Second, the NLRB held, and the First Circuit enforced, that the mere adoption of the confidentiality provision that could chill protected rights was a violation of the NLRA. Under the NLRB's case law, "if a rule is likely to have a chilling effect on Section 7 rights, the Board may conclude that its maintenance is an unfair labor practice, even in the absence of enforcement." The Court also upheld the NLRB's refusal to balance a legitimate business justification for the rule against that possible chilling effect.

Finally, although in most cases an employer has the opportunity to demonstrate that an employee would have been disciplined or discharged even in the absence of the protected activity, in this case the Court upheld the NLRB's rejection of Northeastern Land Services' attempts to prove that the employee would have been discharged even in the absence of the rule. The NLRB held that the discharge of an employee pursuant to an unlawful rule was unlawful in and of itself, notwithstanding any other possible justification for the discharge.

This case is another example of the need for employers to be aware of the provisions and interpretations of the NLRA, even in the absence of a union. Employers should review their policies to ensure that they do not violate Section 7 of the NLRA. And, of course, any policies that conflict with the NLRA should be rescinded (and employees should be so notified).

If you have any questions or require our assistance in reviewing your policies or conducting management training, please contact the Hiscock & Barclay lawyer with whom you normally work or any attorney in our Labor & Employment practice area.

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