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Work Rules Restricting Disclosure of Company Information in Handbook and Confidentiality Agreement Violated NLRA: NLRB
Practical Law Legal Update w-002-6127 (Approx. 5 pages)
Work Rules Restricting Disclosure of Company Information in Handbook and Confidentiality Agreement Violated NLRA: NLRB
by Practical Law Labor & Employment
| Published on 16 Jun 2016 • USA (National/Federal) |
In Schwan's Home Service, Inc. the National Labor Relations Board (NLRB) held that an employer violated Section 8(a)(1) of the National Labor Relations Act (NLRA) by maintaining work rules restricting disclosure of company information in an employee handbook and confidentiality agreement.
On June 10, 2016, in Schwan's Homes Service, Inc., the panel (Board) heading the NLRB's judicial functions held than the employer violated Section 8(a)(1) of the NLRA by maintaining work rules restricting disclosure of company information in an employee handbook and confidentiality agreement (364 N.L.R.B. No. 20 (June 10, 2016)).
The employer maintained an employee handbook and confidentiality agreement with various work rules, including work rules that:
- Restricted disclosure of specified company information.
- Prohibited use of the company name without the employer's approval.
- Prohibited conduct detrimental to the employer's best interests.
An administrative law judge (ALJ) dismissed allegations that these work rules violated Section 8(a)(1) of the NLRA because employees would reasonably understand them to protect the employer's business interests and prevent competitors from recruiting the employer's employees.
The Board reversed the ALJ's holding and held that the work rules were unlawful.
Work Rules Restricting Disclosure of Company Information
The employee handbook contained a work rule that stated in part:
"Trade secret information including, but not limited to, information on devices, inventions, processes, and compilations of information, records, specifications, and information concerning customers, vendors or employees shall not be disclosed, directly or indirectly, or used in any way either during the term of employment or at any time thereafter, except as required in the course of employment with Schwan … Schwan's business shall not be discussed with anyone who does not work for Schwan or who does not have a direct association with the transaction."
The confidentiality agreement contained a work rule that stated in part:
"Confidential and Proprietary Information shall include any information pertaining in any way but not limited to … any information pertaining to the wages, commissions, performance, or identity of employees of Employer … Employee shall neither directly nor indirectly … disclose to any person not in the employ of Employer any Confidential or Proprietary Information."
The Board reasoned that:
- Employees would reasonably understand the work rule from the employee handbook to prohibit them from disclosing information about terms and conditions of employment to each other or to third parties.
- The work rule from the confidentiality agreement explicitly restricts employees from disclosing information about terms and conditions of employment with third parties.
Work Rule Prohibiting Use of the Company Name Without Employer's Approval
The employee handbook contained a work rule that stated in part:
"Any articles, speeches, records or operation, pictures or other material for publication, in which the company name is mentioned or indicated, must be submitted, through your supervisor, for approval or disapproval by the Corporate Communications and Law Departments prior to release."
The Board reasoned that employees would reasonably understand the work rule to prohibit them from publicizing labor disputes without the employer's permission.
Work Rule Prohibiting Conduct Detrimental to Employer's Best Interests
The employee handbook contained a work rule that stated in part:
"Employees shall avoid activities that could appear to influence their objective decisions relative to their company responsibilities. Continued employment with the company is dependent upon strict avoidance of … [c]onduct on or off duty which is detrimental to the best interests of the company or its employees."
The Board reasoned that employees would reasonably assume that the employer would consider protected activity, such as labor protests, to not be in the employer's best interests.
Member Miscimarra concurred in part and dissented in part. He argued that the Board should:
- Overrule the "reasonably construe" standard from Lutheran Heritage Village-Livonia (343 N.L.R.B. 646 (2004)).
- Instead analyze a facially neutral work rule by balancing the justifications for the rule against the potential impact on protected activity.