Joseph Beachboard

Ogletree Deakins P.C.
Torrance, CA
www.OgletreeDeakins.com
Joe.Beachboard@OgletreeDeakins.com
(310) 217-8191

Joseph L. Beachboard is a nationally recognized expert on employment law issues who speaks regularly at SHRM and other HR events. He also is a regular contributor to several national and California publications. In 2000, Mr. Beachboard sold The Labor Letters, Inc., a publisher of monthly employment law journals that he founded to advise human resource professionals. He is a founding member and executive director of the Management Employment Law Roundtable, a national, invitation only, organization of management labor and employment lawyers.

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A temporary employment agency violated federal labor law by including a confidentiality provision in an employment contract, according to a recent National Labor Relations Board (NLRB) ruling (Northeastern Land Services, Ltd. dba The NLS Group and Jamison John Dupuy, 352 NLRB No. 89, 2008). In the case, the agency fired a worker for violating the confidentiality provision.

The NLRB held that the provision was unlawful because employees reasonably could construe it as restricting discussions with union representatives.

This decision is important because the National Labor Relations Act (NLRA) prohibits work rules that restrict the discussion of wages or working conditions among employees or with a union, or rules that might restrict such discussions.

Trouble getting paid

Jamison Dupuy was a right-of-way agent for Northeastern Land Services (NLS), a temporary employment agency. His duties included performing various activities related to the acquisition of land rights for companies in the natural gas pipeline and fiber optic telecommunication industries.

In July 2001, Dupuy was assigned to a project at El Paso Energy. NLS required Dupuy to sign its temporary employment agreement, which included the following confidentiality provision: “Employee also understands that the terms of this employment, including compensation, are confidential to Employee and the NLS Group. Disclosure of these terms to other parties may constitute grounds for dismissal.”

During the El Paso project, Dupuy experienced delays in receiving his pay. Because he felt NLS was not helping him resolve the problem, Dupuy told NLS that he was going to raise the issue with El Paso Energy.

Ultimately, Dupuy did contact El Paso, raising the late payment issue as well as another compensation issue related to reimbursement for the use of his personal computer. He also sent NLS a follow-up e-mail—copied to El Paso—mentioning the computer issue.

NLS then terminated Dupuy, stating that he failed to comply with the confidentiality provision of his employment agreement by discussing compensation issues with El Paso.

Dupuy filed an unfair-labor-practice charge challenging the firing.

Ruling and reversal

Dupuy's claim was first heard by an administrative law judge (ALJ), who dismissed the complaint. The ALJ held that the confidentiality provision did not restrict NLS employees from discussing the terms of their employment with one another.

The ALJ found that, although the provision did restrict the employees' rights to discuss the terms and conditions of employment with third parties, NLS had provided a legitimate business justification that outweighed this restriction on employees' rights. The company stated that it is engaged in a very competitive industry in which confidentiality is critical. Because the confidentiality provision was not unlawful, the ALJ held, NLS did not violate the NLRA when it terminated Dupuy.

The NLRB reversed the ALJ's decision, concluding that the confidentiality provision was unlawful because employees reasonably could construe the language—which precluded discussing compensation and other terms of employment with “other parties”—as prohibiting discussion with union representatives about those issues.

Further, because imposing discipline pursuant to an unlawful policy constitutes a violation of the NLRA, Dupuy's termination was found by the NLRB to have been unlawful.

Based on its findings, the NLRB ordered injunctive relief that included removing the confidentiality language from NLS agreements, reinstating Dupuy and deleting all references to his termination from his personnel file.

In addition, NLS was ordered to “make Jamison Dupuy whole for any loss of earnings and other benefits” caused by its actions.

Practical impact

This decision does not completely tie employers' hands regarding confidentiality agreements—but it does draw a bright line around discussing compensation and working conditions.

Employers may restrict employee speech regarding trade secrets, undisclosed company business plans or confidential employee or customer information. Generally, employers may take steps to prevent employees from placing the company in a bad light through employee statements or actions that could appear to represent a company position.

The key to any discipline for legitimate confidentiality breaches is a well-crafted policy clearly detailing what speech or actions violate company policy. Employers should have their attorneys examine all company policies to ensure they comply with current interpretations of state and federal laws.

Once policies are in place, they should be updated regularly to assure they remain in compliance. In particular, employers that routinely include confidentiality language in employment agreements and employee handbooks should ensure that it cannot be interpreted as precluding employees from discussing compensation or other employment terms and conditions with union representatives.

Such interpretation can create unintended liability for employers.