NLRB Rules Non-Disclosure and Non-Disparagement Provisions are Unlawful

It is fairly common for an employment agreement to require that an employee maintain confidentiality of employer information, and refrain from making critical or defamatory comments about the employer.  Recently, an NLRB Administrative Law Judge (ALJ) found these kinds of provisions to be unlawful in an employment agreement.

In Quicken Loans, Inc., 28-CA-75857, JD(NY)-03-13 (Jan. 8, 2013), an employee worked for the employer as a mortgage banker.  The employee resigned in 2011.  Shortly after the employee resigned, the employer sued the employee for violating the company’s “no contact/no raiding” and non-compete provisions of the employment agreement.  Part of the agreement contained a  prohibition on disclosing confidential information, which was defined to include “non-public information relating to or regarding the Company’s business, personnel, customers, operations, or affairs,” and further was defined to include “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.”

The employment agreement also included a non-disparagement clause which required that employees “not publicly criticize, ridicule, disparage, or defame the Company through any written or oral statement.”  In response to being sued, the mortgage banker filed an unfair labor practice charge with the NLRB, claiming that the confidentiality and non-disparagement clauses were unlawful.  After a trial, the ALJ agreed.

The ALJ found that the confidentiality restrictions were unlawful because the restrictions would have a chilling effect on employees’ Section 7 rights to discuss the names, wages, addresses, or telephone numbers of other employees with their coworkers or union representatives.

The ALJ also found that the non-disparagement clause was unlawful.  Because Section 7 of the NLRA allows employees the right to criticize their employers, the ALJ reasoned that the non-disparagement clause could be viewed by an employee as restricting the Section 7 right to engage in protected concerted activities.

Takeaway:  While the ALJ’s decision is not binding precedent unless it is appealed to and upheld by National Labor Relations Board, it is a good example of the NLRB General Counsel’s expansive view of the NLRA.  Employers should consult their labor counsel whenever they intend to limit disclosure of information by employees or restrict employee comments about the employer or coworkers as part of an employment agreement or policy to ensure compliance with the NLRA.

About Michael Miller

Michael is a Chambers-rated attorney in Briggs and Morgan's Employment, Benefits, and Labor group and is head of the firm’s Employment Law Counseling and Compliance practice group. He has 25 years experience counseling employers to prevent unwanted litigation and advises companies of ongoing changes in federal, state and local employment law. Michael advises employers in all areas of employment law including discipline and discharge, leaves of absence, wage and hour compliance, non-compete and confidentiality agreements, affirmative action plans, background checking, and drug/alcohol testing. For Michael's full bio, click here.

Posted on February 20, 2013, in Non-Competition and Confidentiality, Unions and Labor Law and tagged . Bookmark the permalink. Leave a comment.

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