Hunton Employment & Labor Perspectives

We have been reporting in this space for the better part of a year about the uptick in NLRB enforcement activity in non-union workplaces.  One of the Board’s most noteworthy – and controversial – areas of focus has been on the question whether employer confidentiality rules unlawfully chill protected concerted employee activity under the National Labor Relations Act.  Last week, for the first time, a U.S. Court of Appeals agreed with the Board that certain confidentiality restrictions can have such an effect.

The case involved Flex Frac Logistics, LLC, a non-union trucking company based in Fort Worth, Texas.  The company had required its employees to sign a confidentiality policy that prohibited them from sharing or copying “confidential information,” including “personnel information and documents,” without prior approval from company management.  Violations of the policy were punishable by disciplinary action up to, and including, termination.  An employee discharged for violating the policy filed an unfair labor practice with the Board, which ruled in 2012 that the policy was overly broad and contained language employees could reasonably interpret as restricting their exercise of Section 7 rights.  The company petitioned the Fifth Circuit for review, and the Board filed a cross-petition for enforcement.

On review, the Fifth Circuit upheld the Board’s ruling.  Despite acknowledging that the rule did not expressly prohibit Section 7 activity, the Court reasoned that the company’s ban on discussing “personnel information and documents” could reasonably be construed by employees to prohibit discussion of their wages.  The Court noted the rule “gives no indication that some personnel information, such as wages, is not included within its scope.”  The Court also rejected the employer’s argument that its employees did not actually read the rule as the Board suggested it could be read, ruling that “the actual practice of employees is not determinative” to its ruling whether the policy ran afoul of the NLRA.

The Fifth Circuit’s Flex Frac decision is troubling news for employers.  It validates the Board’s view that an employer confidentiality policy can violate the NLRA even if it does not expressly prohibit employees from engaging in Section 7 activity.  Perhaps the good news is that the Court’s decision was based on the limited facts presented in the case and its reach is limited to employers in the Fifth Circuit.  It remains to be seen whether other federal courts will take a different view.  Nonetheless, Flex Frac is a reminder to employers to review (and, possibly, revise) their employee confidentiality policy sooner rather than later.