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Company Rule Forbidding Discussion of Wages Held Illegal

By Declan Leonard  5/1/2014
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A confidentiality agreement that could reasonably be construed to prohibit employees from discussing wages with those outside the company violated the National Labor Relations Act (NLRA), the 5th U.S. Circuit Court of Appeals ruled.

Flex Frac Logistics is a nonunion trucking company based out of Texas that hauls sand to oil and gas well sites. The company requires each employee to sign a confidentiality clause that reads in relevant part “Employees deal with and have access to information that must stay within the Organization. Confidential Information includes, but is not limited to ... our financial information, including costs ... [and] personnel information and documents. ... No employee is permitted to share this Confidential Information outside the organization. ... Disclosure of Confidential Information could lead to termination, as well as other possible legal action.”

When Flex Frac fired employee Kathy Lopez in 2010, she filed a claim with the National Labor Relations Board (NLRB) challenging her termination. In reviewing Lopez’s allegations, the NLRB came across the above confidentiality provision and, even though Flex Frac was not a union employer, the provision was deemed unlawful by the NLRB because it prohibited employee discussion of wages. The NLRA, which the NLRB enforces, prohibits all employers—even those that have no union employees—from taking any action or having any policies that restrict the ability of employees to discuss and try to change the terms and conditions of their employment, including pay.

The case was ultimately appealed to the 5th Circuit. The court acknowledged that the above policy did not explicitly prohibit employee discussion of wages. But the court found that an employee could reasonably construe the above prohibition on sharing company “financial information” and “personnel information” as applying to employee wages and compensation. Since discussion of wages among employees is protected under the NLRA, the prohibition violated that law, according to the 5th Circuit. In essence, the appeals court determined that the above language served as a chilling effect on an employee’s right to try to improve workplace conditions.

Interestingly, the 5th Circuit’s decision would allow for strict confidentiality clauses prohibiting discussion of the following employee-specific information: employee Social Security numbers, employee medical reports, employee criminal background checks, results of workplace drug tests and other similarly sensitive information. But the amount of pay each employee receives cannot be among the off-limits topics addressed in a valid confidentiality provision, according to the 5th Circuit in this case.

Flex Frac Logistics v. NLRB, 5th Cir., No. 12-60752 (March 24, 2014).

Professional Pointer: This is the latest in a string of cases in which the NLRB is challenging company policies that it claims have a chilling effect on the right of employees to try to improve their workplace conditions, as protected by federal law. All companies, including nonunion employers, should take a careful look at their employment policies and procedures to make sure that their language does not run afoul of the NLRA.

Declan Leonard is managing partner of Berenzweig Leonard in Northern Virginia, where he leads the firm’s management-side employment law practice.


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