Beware of Overly Broad Confidentiality Agreements with Employees

Most employers operate under the impression that the National Labor Relations Act only applies to employers dealing with unions. The NLRA, however, actually governs workplaces whether unionized or not. In particular, the Act’s Section 7 prevents most all employers from prohibiting employees from discussing basic employment conditions, including salary and discipline histories. Specifically, the NLRA largely guarantees employees the right “to engage in … concerted activities for … mutual aid or protection” along with the rights potentially to self-organize or join a labor organization (29 U.S.C. § 157). Perhaps most commonly, Section 7 of the Act prohibits employers from barring employees from talking about their wages with each other, discussing how their supervisors treat them at work and conversing about workplace conditions generally.

Employers need to be aware that these same restrictions may have implications concerning the scope of confidentiality agreements employees are asked to sign. Very recently, the U.S. Court of Appeals for the District of Columbia Circuit sided with the National Labor Relations Board and struck down terms from a confidentiality agreement that the employer entered into with many of its employees. Specifically, the form confidentiality agreement included in its definition of “confidential information” a very broad description of “private employee information” referencing “salaries” and “disciplinary action.” In short, the D.C. Circuit held that prohibiting employees from talking about that kind of information in order to comply with the confidentiality agreement could chill employee rights to talk about workplace conditions under Section 7 of the NLRA. Accordingly, the D.C. Circuit affirmed that portion of the NLRB decision invalidating the confidentiality agreement in all of the employer’s places of business and requiring the employer to post a remedial notice to that effect in all of its facilities where it utilized the form confidentiality agreement at issue.

Specifically, in Banner Health System v. NLRB, Banner Health operated a nonprofit health care system in Arizona, including a hospital in Phoenix where Paul Navarro worked. Navarro balked at some new procedures being put in place involving the sterilization of medical instruments. When he failed to follow a new – and he thought questionable – protocol, Navarro’s supervisor gave him a warning and then later a negative yearly evaluation. Navarro filed an unfair labor practice charge with the NLRB because he believed, essentially, that he had been illegally sanctioned for promoting workplace safety.  During the course of investigating the charge, the NLRB determined that Banner Health made its employees sign an overly broad form confidentiality agreement, among other allegations in the NLRB’s eventual retaliation complaint against Banner Health.

Banner Health’s confidentiality agreement included in its broad definition of “confidential information” a variety of information, including “private employee information (such as salaries, disciplinary action, etc.) that is not shared by the employee.” Employees could be subject to discipline, including termination, for violating the broad confidentiality agreement. Banner Health argued that, as a health care system, it needed to have broad confidentiality protections to safeguard patient health information. It also argued that its specific definition here allowed employees to discuss the salary and disciplinary histories of an employee who “shared” such information voluntarily. The D.C. Circuit, however ultimately rejected these arguments. It found the “private employee information” to be far removed from “patient information,” which also was included in the confidential information definition. The D.C. Circuit further found the “not shared by the employee” language to be vague and still sufficient to chill downstream communication of salary, disciplinary history and workplace conditions that may or may not have been voluntarily shared by a particular employee in the first place. The D.C. Circuit stated that “to prohibit one employee from discussing another employee’s pay without the knowledge and permission of the other employee muzzles employees who seek to engage in concerted activity for mutual aid or protection” (citing other NLRB decisions).   

The D.C. Circuit ultimately held that Section 7 of the NLRA “protects employees’ rights to discuss organizations and the terms and conditions of their employment, to criticize or complain about their employer or their conditions of employment, and to enlist the assistance of others in addressing employment matters.” Here, the key analysis was whether the terms of Banner Health’s confidentiality agreement “could be reasonably construed by employees to restrict such activity.” An administrative law judge first analyzing the issue and then a three-member panel of the NLRB determined that Banner Health’s confidentiality agreement could be construed in precisely that fashion. The D.C. Circuit agreed.

Employers in the Fourth Circuit (North Carolina, South Carolina, Maryland, Virginia and West Virginia) should be aware of the Banner Health decision for multiple reasons. First, although the D.C. Circuit’s decision is not controlling for cases still to be decided in these five states, the opinion will carry precedential weight. For many lawyers, the D.C. Circuit functions effectively as a “first among equals” within the federal circuits. It carries special heft – particularly in regulatory matters like interpreting the NLRA – because of (i) its proximity to the federal agencies in Washington whose cases regularly make up its docket, (ii) its proximity to the U.S. Supreme Court, and (iii) the number of its alumni who go on to the High Court. Second, in the absence of specific rulings from the Fourth Circuit to the contrary, most courts in our circuit will look to the D.C. Circuit for guidance on this issue. Of course, the Banner Health case may not yet be over, and the parties may seek review in the Supreme Court. In the interim, however, the case is significant because the D.C. Circuit effectively endorses the NLRB view that Section 7 of the Act places clear restrictions on what employers may or may not include in confidentiality agreements with their employees.

Accordingly, employers should take away a few key learnings from the Banner Health decision. First, employers should be mindful of the NLRA’s larger requirements, whether a workplace is specifically unionized or not. Employers at a minimum should familiarize themselves with Section 7 of the Act. Second, employers should review their form confidentiality agreements generally to make sure they are intentionally and narrowly drafted to protect only the employer’s legitimate needs. Third, specifically, employers should review their definitions of confidential information in such agreements and make sure that they have legitimate business reasons to buttress each type or category of information included in the definition. Fourth, employers should review other types of agreements with employees – including handbooks, noncompete agreements, other form employment agreements, etc. – that include definitions of “confidential information” and make sure those definitions do not run afoul of the NLRA’s requirements. Put simply, confidentiality terms should be drafted in light of an employee’s actual tasks. Banner Health may have avoided some of the issues it faced here if it had included exceptions to a blanket prohibition of the sharing of salary and disciplinary issues, or if it had elaborated more on the ability of employees voluntarily to share their information with other employees. Employers are well advised to take a look at their agreements now – and determine how they will draft them in the future – in light of the D.C. Circuit’s decision in Banner Health and before an employee files his or her own NLRB complaint. 

For more information regarding the NLRA, confidentiality agreements or the Banner Health decision, please contact a member of Robinson Bradshaw’s Employment and Labor Practice Group.