United States: The NLRB Blows the Lid Off Confidentiality Policies

Many employers may now be in violation of Section (8)(a)(1) of the National Labor Relations Act (NLRA) as the result of a newly released decision by the National Labor Relations Board (the Board).

Most employers are aware that any rule prohibiting employees from discussing their own wages or terms and conditions of employment with co-workers violates Section 8(a)(1) of the NLRA, unless the employer has a legitimate and substantial business justification for the rule. Historically, such violations have been found where employers explicitly instructed employees not to discuss these topics or disciplined them for so doing.

Recently, however, the Board expanded the potential arena for these violations. In Cintas Corp., 244 N.L.R.B. No. 118 (June 30, 2005), the Board held that a broadly stated generic corporate confidentiality policy violated Section 8(a)(1) because it "could reasonably be construed" to prohibit employees from discussing their wages or terms and conditions of employment. Because broad confidentiality policies are so common, many employers will need to review and modify their longstanding confidentiality policies, even if they have never been applied to prohibit discussion of wages and benefits among co-workers.

The Cintas Corporation (Cintas) maintained a simple, broad, and typical confidentiality policy in its employee handbook:

We honor confidentiality. We recognize and protect the confidentiality of any information concerning the company, its business plans, its partners*, new business efforts, customers, accounting and financial matters.

The employee handbook further stated that violation of this policy could result in disciplinary action. There was no indication in the employee handbook or otherwise that Cintas had applied its confidentiality policy to discipline employees who discussed their wages or terms and conditions of employment. In fact, Cintas presented evidence that no employee had ever been disciplined for discussing their wage rates and/or other terms and conditions of their employment.

Despite the apparent innocuous intent and reality of the confidentiality policy, the Board took issue with the portion of the policy protecting "the confidentiality of any information" concerning "the company" and "its partners." The Board held that this "unqualified prohibition … could reasonably be construed by employees to restrict discussion of wages and other terms and conditions of employment with their fellow employees and the Union." Accordingly, finding a violation of Section 8(a)(1), the Board prohibited Cintas from maintaining policies that "prohibit employees from discussing with nonemployees, or among themselves, wages, hours, and other terms and conditions of employment." The Board further ordered Cintas to rescind and/or replace the policy, to notify all employees of the rescission and/or replacement policy by distributing an insert or revised employee handbook, and to post a Notice to Employees at all U.S. facilities.

Shortly after the Cintas decision, the Tenth Circuit Court of Appeals upheld a similar Board decision finding an employer’s policies unlawful under Section 8(a)(1). In Double Eagle Hotel & Casino v. N.L.R.B., 2005 WL 1635416 (10th Cir. July 13, 2005), the court reviewed the Board’s finding that the casino’s "Confidential Information" and "Communication" policies unlawfully restricted employees’ right to discuss wages and other terms and conditions of employment.

The casino’s Confidential Information policy prohibited the following types of information from "leav[ing] the department, other than by activity/job requirement, either by document or verbally":

• disciplinary information
• grievance/complaint information
• performance evaluations
• salary information
• salary grade
• types of pay increases
• termination data for employees who have left the company.

The separate Communication policy incorporated this definition of confidential information and stated that an employee may not, "under any circumstances, …communicate any confidential or sensitive information concerning the Company or any of its employees to any non-employee" without the prior approval of management.

Upholding the Board’s decision and rationale, the Tenth Circuit agreed that the casino’s Confidential Information policy "clearly violates Section 8(a)(1) because it expressly includes salary information, salary grade, and types of pay increases." Likewise, echoing Cintas, the court upheld the Communication policy as unlawful because "employees could reasonably interpret it to prevent discussion of salary information." The Tenth Circuit thus enforced the Board’s order (nearly identical to that given in Cintas) prohibiting the casino from maintaining confidentiality rules that "prohibit employees from discussing with nonemployees or among themselves wages hours, and other terms and conditions of employment." The court noted that the casino was "free to modify its rules" to protect its interests without violating Section 8(a)(1).

Broad confidentiality policies are prevalent. Many such policies implicitly prohibit employees from discussing wages and other terms and conditions of their employment with one another. Even if the restriction is an unintended, unenforced consequence, these policies nevertheless leave employers open to Section 8(a)(1) liability. Under Cintas, an employer’s innocuous intent will not save it from Section 8(a)(1) liability. Accordingly, employers should review their confidentiality policy and any related policies immediately.

What Steps Should Employers Take to Avoid Liability under Cintas?

Fortunately, the Cintas antidote should be fairly painless. Employers should take three simple steps to appropriately tailor their policies without sacrificing their legitimate interest in protecting confidential information.

First, employers should remove any specific prohibitions barring employees from discussing wages, hours, and other terms and conditions of employment with one another. Even in the pre-Cintas landscape, such restrictions likely were unlawful.

Next, employers should add the following disclaimer to broad or ambiguous policies that could be viewed as restricting employees from discussing wages and other terms and conditions of their employment with one another:

Nothing in this [Confidentiality] policy is intended to prohibit employees from discussing with one another, or with third parties who are not competitors of the Company, wages, hours, and other terms and conditions of employment.

This disclaimer should negate the argument that employees might "reasonably construe" the policy as a restriction on their right to discuss wages and other terms and conditions of employment.

Finally, employers should clearly communicate the new or revised policy to all employees as appropriate.