Non-Disclosure and Non-Disparagement Provisions in Employment Agreements Not Off-Limits Under the NLRA
In a recent case involving Quicken Loans, Inc., Case No. 28-CA-75857, JD(NY)-03-13 (January 8, 2013), attached here, an NLRB Administrative Law Judge (“ALJ”) found that employers’ commonly adopted practice of including non-disclosure and non-disparagement provisions in employment agreements violated the NLRA. The ALJ concluded that these contract provisions created a chilling effect on the employees’ right to discuss their working conditions with coworkers and others.
In Quicken Loans, Inc., the employee worked from 2006 until her resignation in late 2011. Shortly after her resignation, Quicken sued the employee for violating the company’s “no contact/no raiding and the non-compete provisions” of the Mortgage Banker Employment Agreement (MBEA). The “Proprietary/Confidential Information” broadly defined confidential information as “non-public information relating to or regarding the Company’s business, personnel, customers, operations, or affairs,” and encompassed “personal information of co-workers, managers, executives, and officers; handbooks, personnel files, personnel information such as home phone numbers, cell phone numbers, addresses, and email addresses, as well as financial information for the company’s executives and officers.” The MBEA prohibited its employees from disclosing this information “to any person, business, or entity.” The employee in turn filed a complaint with the NLRB claiming that the contract provisions violated her statutory rights. This month, an ALJ ruled in the employee’s favor.
In reaching his conclusion, the ALJ analyzed the non-disclosure and non-disparagement provisions under Lafayette Park Hotel, 326 NLRB 824, 828 (1988), and Lutheran Heritage Village-Livonia, 343 NLRB 646 (2004), where the Board determined, among other criteria, whether “employees would reasonably construe the provisions [of an employment policy] to prohibit Section 7 activity,” when the policy does not explicitly restrict Section 7 activity. The ALJ concluded that this section of the agreement had a chilling effect on Section 7 rights in violation of Section 8 (a)(1) of the Act. The ALJ explained:
In complying with these restrictions employees would not be permitted 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. This would substantially curtail their Section 7 protected concerted activities.
Having invalidated the non-disclosure provision, the ALJ turned to the “Non-Disparagement” provision of the MBEA. The “Non-Disparagement” provision stipulated that employees must not “not publicly criticize, ridicule, disparage, or defame the Company…through any written or oral statement…” The ALJ, noting that Section 7 allows employees the right to criticize their employers, whether among co-workers, or “appealing to the public,” concluded that an employee “could reasonably construe [the non-disparagement clause] as restricting his rights to engage in protected concerted activities,” and held that the non-disparagement provision also violated Section 7 of the NLRA.
While the ALJ’s decision is not binding precedent unless it is appealed to and sustained by the National Labor Relations Board, it provides yet another example of the NLRB General Counsel’s expansive view on the reach of the National Labor Relations Act and the receptiveness to such a view by the Board’s ALJs. We will continue to monitor this case, and others like it, and inform you of any subsequent appeal and decision by the Board.
Employers are reminded that when drafting language which is meant to limit an employee’s right to discuss or disclose information to employees or other audiences, the language should be written to carefully and concisely define the information to be protected. Absent a very clear business justification, employers should avoid limiting an employee’s right to discuss wages or benefits or other terms and conditions of employment. Additionally the employer should include a disclaimer clearly stating that the policy or provision is not intended to discourage or prohibit concerted activity under Section 7 of the NLRA. The same is true for non-disparagement policies—such policies should be limited to defamatory statements about an employer and its employees, or attacks which are purely personal in nature, and have no relationship to the employer’s policies on wages, hours, and terms or conditions of employment.