By Christina Pazzanese
and Thomas E. Egan
The Daily Record Newswire
BOSTON, MA — A temporary employment agency could not enforce a confidentiality provision barring workers from disclosing the terms of their employment to “other parties,” the 1st Circuit has ruled.
The National Labor Relations Board found that the confidentiality clause was unlawful because employees reasonably would construe it to prohibit activity — including discussions of their compensation with union representatives — protected by federal law.
The 1st Circuit affirmed.
“The precise subject matter of the forbidden disclosure — terms of employment, including compensation — went to a prime area of concern under Section 7 [of the National Labor Relations Act],” the court said.
The 1st Circuit went on to uphold the board’s finding that the employment agency violated the National Labor Relations Act by discharging an employee for violating the confidentiality provision.
“The Board supportably relied on its own precedents to determine that any discharge pursuant to an unlawful rule is itself unlawful,” the court concluded.
Richard D. Wayne of Hinckley, Allen & Snyder in Boston represented respondent Northeastern Land Services.
He said the decision expands the NLRB’s power and significantly lowers the standard of proof for Section 7 violations of the National Labor Relations Act.
“It’s a confirmation that the standard of judging the legality of work rules and policies is not going to be [based] upon a balancing test, but instead is going to be decided upon the ‘informed decision’ of the National Labor Relations Board,” he said.
The fact that the temporary employee in this case was not involved in concerted activity and yet afforded protection under Section 7 is a troubling development for employers, he said.
“I think it is a line in the sand. Even a person engaged in self help could have a remedy with [the] NLRB,” Wayne said. “All they really have to do is say, ‘We believe the rule is overly broad and we believe it chills employee conversation.’”
Mary T. Sullivan, a labor attorney at Segal Roitman in Boston who was not involved in the case, disagreed that the decision represents a substantial break with past practice, noting that the NLRB has long applied a per se rule to overbroad provisions.
“I suspect what’s a surprise to people is that this statute isn’t just about unions, it’s about workers and their right to talk to each other,” she said. “I think a lot of lawyers don’t think about that.”
A spokeswoman for the NLRB declined a request to speak to attorneys involved in the suit.
Northeastern Land Services, Ltd., doing business as The NLS Group, operates a temporary employment agency in East Providence, R.I., that provides employees to businesses in the natural gas and telecommunications industries, but pays the workers directly.
Jamison Dupuy was employed by NLS as an agent assisting clients in acquiring land rights.
His position required that he sign a temporary employment contract that included a homespun confidentiality provision, which barred him from sharing with others the terms of his employment, including his compensation.
“Disclosure of these terms to other parties may constitute grounds for dismissal,” the clause read in relevant part.
Dupuy went on to express dissatisfaction over the company’s failure to pay him in a timely fashion and its reimbursement practices, and he subsequently sought direct employment from an NLS client. NLS then terminated him.
A company executive later testified that Dupuy’s failure to adhere to the confidentiality clause was the reason for his dismissal.
Dupuy, an attorney, filed an unfair labor practice charge, alleging in a January 2002 complaint that NLS violated Section 8(a)(1) of the National Labor Relations Act by maintaining and enforcing an unlawful confidentiality clause in the employment agreement and by firing him for violating the terms of that clause.
NLS maintained the discharge was lawful because Dupuy was not engaged in union or concerted protected activity.
The company contended that he would have been terminated even in the absence of the provision.
An administrative law judge found that although the provision did restrict Dupuy’s right to discuss his employment terms with others, the clause did not violate Section 8(a)(1) because the company did not prohibit talk among fellow employees.
But in September 2010, the NLRB determined that the confidentiality clause was overbroad and indeed unlawful because workers could reasonably construe it to prohibit Section 7 activity.
The board ordered NLS to rescind the provision; notify present and past employees subject to the temporary employment agreement of the board’s decision; reinstate Dupuy to his old job or a substantially similar one; make Dupuy whole for lost earnings and benefits; and remove references to the discharge from his personnel file.
NLS challenged the ruling, saying it failed to consider the legitimate business justification for the provision and was inconsistent with prior caselaw.
The employer contended that the board failed to consider the legitimate justification it had for the confidentiality provision: labor costs were a key component of its bids to clients, and the employer did not want its employees jeopardizing its bids.
That argument, the 1st Circuit found, was at odds with NLRB precedent, particularly its 2004 Lutheran Heritage ruling.
Under that precedent, an employer’s work rule that does not explicitly restrict Section 7 activity is nonetheless unlawful if employees would reasonably construe the language of the rule to prohibit Section 7 activity, it said.
The plain language of the employer’s confidentiality provision provided: “Disclosure of these terms [of employment] to other parties may constitute grounds for dismissal.”
The NLRB’s finding — that the language could be fairly read to extend to disclosure of terms of employment to union representatives — was “supportable. ... While the Board could have chosen to structure its rule differently and engage in a balancing analysis, we owe deference to its decision not to do so.”
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