Board Upholds Firing of Employee for Violating Overbroad and Unlawful Confidentiality Rule

The NLRB recently held that an employer lawfully terminated an employee for intentionally violating an overbroad and unlawful confidentiality rule.  Flex Frac Logistics, 360 NLRB No. 120 (May 30, 2014).  While the Board’s decision is a welcome change of pace, the result is very fact-specific.  The employer makes deliveries to energy companies for oil and gas drilling, using both directly-employed drivers and contractor-trucking companies. The employer required employees to sign an employment agreement containing a confidentiality clause prohibiting disclosure of financial information, as it was concerned with preserving the confidentiality of the rates it charges its clients.  In a prior decision, the Board struck down the employer’s confidentiality rule as unlawfully overbroad, because it could be read to prohibit employees from discussing wages, hours, or other terms and conditions of employment.  The Fifth Circuit later upheld the Board’s determination.  See 358 NLRB No. 127, slip op at 3 (2012), enf’d., 746 F.3d 205 (5th Cir. 2014).  

Following the Fifth Circuit’s enforcement of its order, the Board remanded the case to the administrative law judge to determine whether the discharge of an accounts-payable employee who deliberately disclosed client rates was unlawful.  The ALJ found that the employer’s discharge of the employee was proper.  The ALJ applied the Board’s analysis in Continental Group, 357 NLRB No. 39 (2011), where the Board clarified that discipline pursuant to an unlawfully overbroad rule is unlawful only if the employee violated the rule by: (1) engaging in protected conduct; or (2) engaging in conduct that otherwise implicates the concerns underlying Section 7.  

The Board upheld the ALJ’s finding, emphasizing that the employer has a legitimate business interest in keeping its rates confidential and that the employer’s business suffered because of the employee’s disclosure.  The Board further noted that although the employee’s “conduct arguably implicated concerns underlying the Section 7 rights of others,” her “deliberate betrayal” of the employer’s strong confidentiality interest and the harm she caused were “plainly and overtly” the reasons the employer fired her.  Because the employee’s discharge could not be perceived as relating to discussing wages or other terms and conditions of employment, the Board concluded that any chilling effect on employees’ exercise of protected rights would be minimal.  Although this case deviates from the recent trend of pro-employee decisions and provides assurances to employers with confidentiality concerns, employers should be advised that this case has a particularized set of facts. Going forward, the Board may permit discipline of employees who violate an unlawful work rule but likely only in those limited circumstances where there is no basis for concluding that an employee’s violation of an unlawful work rule is protected conduct.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.