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Court of Appeals Affirms NLRB Ruling That Overbroad Confidentiality Requirement Is An Unfair Labor Practice

March 28, 2007

A federal appeals court, affirming a decision of the National Labor Relations Board (the "NLRB"), has ruled that a personnel handbook provision which required employees to maintain the confidentiality of all company information unlawfully interfered with the employees’ rights under the National Labor Relations Act ("NLRA") to discuss their terms and conditions of employment with each other and with union organizers. Cintas Corp. v. NLRB, U.S. Court of Appeals, D.C. Cir., No. 05-1305, March 16, 2007, enforcing 344 N.L.R.B. 118 (2005).

The handbook provision at issue stated: "We recognize and protect the confidentiality of any information concerning the company, its business plans, its partners [employees], new business efforts, customers, accounting and financial matters." Another section of the handbook subjected employees to disciplinary action if they made an "unauthorized release of confidential information." The employer appealed the NLRB’s ruling that found the handbook provisions to be unlawful, and asserted on appeal that the NLRB’s overreaching interpretation of the confidentiality rule was the result of "a creative imagination" that "chooses absurdity over reason" and ignored a realistic understanding of the language in the handbook.

Rejecting the employer’s contentions, the Court of Appeals stated that the right of employees to self-organize and to bargain collectively, established by the NLRA, necessarily encompasses the right effectively to communicate with one another regarding conditions at the workplace and to have like conversations with outside union organizers. The court found that the broadly-worded confidentiality rule at issue impinged on that right because an employee could reasonably interpret the restriction to prohibit discussion of wages and other terms and conditions of employment with either other employees or union organizers. Even though there was no evidence that any employee actually interpreted the rule to prohibit such discussions, the rule, according to the court, lent itself to such an understanding and it was, therefore, overbroad in violation of the NLRA. Lastly, even in the absence of actual enforcement of the rule against employee discussions of union organizing or self-organization, the court reasoned that the "mere maintenance" of such a rule was an unfair labor practice because it would likely chill NLRA-protected organizing activity.

This decision does not mean that all employer confidentiality policies are unlawful. Indeed, the court concluded its decision by noting that the rule at issue was distinguishable from those which the NLRB and the courts had previously found to be lawful; in those cases, the specific context or language made clear that the rule protected certain forms of confidential information but did not restrict employees’ rights to discuss or disclose their own terms and conditions of employment. For example, rules prohibiting discussion of medical information that intrudes upon "patient confidentiality" in healthcare institutions (Aroostook County Reg’l Ophthalmology Ctr. v. NLRB, 81 F.3d 209, 212-13 (D.C.Cir. 1996)), prohibitions on the discussion of "customer or marketing lists and strategies, financial information, computer files and programs" (Fiesta Hotel Corp., 344 N.L.R.B. No. 159 (2005)), and restrictions on the discussion of "proprietary information, including … intellectual property" (Mediaone of Greater Florida, 340 N.L.R.B. No. 29 (1999)), have all been held to be lawful restrictions.

These NLRB and court rulings allow employers to protect legitimate, proprietary information from disclosure to those having no legitimate business need to know; however, information about employees’ own wages, benefits and other conditions of employment cannot be made confidential on pain of disciplinary action. For example, personnel and payroll department staff may lawfully be instructed to keep confidential the salary, benefits, and like information they acquire about other employees in the course of their duties; however, they may not be compelled to refrain from discussing their own wage and benefits information with others. Similarly, marketing, sales, and financial information about the company, vendor or customer-supplied information, and the company’s production processes and intellectual property may all legitimately be kept confidential. All employers should review their confidentiality policies in light of these decisions to ensure that policies intended for lawful and legitimate purposes are not drafted in an overbroad fashion, resulting in unwitting violations of the NLRA.