February 11, 2014

NLRB Finds Employer's Confidentiality Policy Violates Federal Labor Law

As we have discussed in prior updates (see list and links under "Legal Updates" down left column), the National Labor Relations Board (NLRB) has recently been striking a number of employer handbook policies, including employers' confidentiality policies. On February 6, 2014, the NLRB determined that employer MCPc, Inc., a technology product and service company, violated the National Labor Relations Act by (1) maintaining an "overly broad" confidentiality policy and (2) by discharging employee Jason Galanter for his protected concerted activity. See NLRB Case No. 06-CA-063690. MCPc's confidentiality policy at issue was contained in MCPc's employee handbook and stated that "dissemination of confidential information within [the company], such as personal or financial information, etc., will subject the responsible employee to disciplinary action or possible termination." 

In early 2011, Galanter, an engineer, attended a "team building" lunch meeting with the Director of Engineering and several other employees. During this meeting, Galanter discussed the heavy workload of the engineers and urged MCPc to hire additional engineers to alleviate some of the burden. He also stated that the recent hiring of a corporate executive with a $400,000 salary could have instead been allocated to hire additional engineers. Other employees echoed Galanter's sentiment. Approximately one week later, Galanter was called into a meeting with MCPc's CEO and Chairman. Galanter was accused of improperly accessing computer files to discover the new executive's salary (Galanter did in fact have special computer access rights due to a project that he was working on) in violation of the confidentiality policy. Galanter's employment was then terminated.

The NLRB first explained that MCPc's confidentiality policy was overly broad and that employees could reasonably construe it to prohibit discussion of wages and other terms and conditions of employment with co-workers. These are protected activities under Section 7 of the NLRA. The Board then explained that Galanter engaged in protected concerted activity when discussing with others the terms and conditions of employment, including heavy workloads and staffing shortages, at a "team building" meeting, and that MCPc discharged Galanter for that very activity. The Board also rejected MCPc's argument that Galanter's discharge was lawful because it was based on a good faith belief that Galanter improperly obtained confidential information about executive pay by way of his special computer access. MCPc's argument failed for several reasons, one of which was the fact that the reported misconduct was proven by a preponderance of the evidence not to have occurred.

The Board ordered MCPc to cease and desist from maintaining its confidentiality policy and from discharging or otherwise discriminating against employees because they engage in protected concerted activities. The Board also ordered MCPc to take a number of affirmative steps, including among other things, the rescinding of the confidentiality policy, offering Galanter full reinstatement to his former position or a substantially equivalent position with full compensation for lost earnings and benefits, and removing any references in its files to the unlawful discharge of Galanter.

In light of this decision, employers should evaluate whether their confidentiality policies are overly broad and thus run afoul of the NLRB's ruling and the NLRA. Additionally, employers should continue to exercise sensitivity in discharge and discipline decisions, considering whether such discharge or discipline could be viewed as resulting from protected activity under the NLRA. 

If you have questions about this or other labor matters, please contact any of Faegre Baker Daniels' labor management relations attorneys.

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