Overbroad confidentiality agreements can spell doom

Jonathan Cain

Broad confidentiality agreements,
whether written into an employment
contract or noted in a company
policy manual, are so commonplace
that employees and employers usually
give little thought to their content. If a
question arises about an employee con-
fidentiality agreement, it usually is how
to make it more inclusive, not whether
the policy is directed to maintaining the
confidence of genuinely sensitive information,
or if it is even necessary.

As a ruling from the U.S. Court of
Appeals for the D.C. Circuit earlier this
year demonstrates, an employee confi-
dentiality policy can cause legal problems
for the employer if it is not narrowly
tailored to a legitimate need. The
court ruled that an employer violated
the National Labor Relations Act
because it adopted an employee confi-
dentiality policy that was so broad
employees could reasonably construe
the policy, which was backed with disciplinary
provisions, to prohibit them
from discussing the terms and conditions
of their employment with other
employees. The NLRA protects such
discussion.

In the D.C. Circuit case, the employee
handbook contained a confidentiality
policy similar to many in the information
technology industry: "We honor
confidentiality. We recognize and protect
the confidentiality of any information
concerning the company, its business
plans, its [employees], new business
efforts, customers, accounting and
financial matters."

Confidentiality language also
appeared in the company's discipline
policy which warned employees that
they could be disciplined "for violating
a confidence or [for the] unauthorized
release of confidential
information."

The National Labor Relations Board
filed an unfair labor practice charge
against the company, alleging that the
broad confidentiality policy interfered
with the employees' right to discuss
terms and conditions of their employment
with others. This interferes with
the employees' right to organize and
bargain collectively.

Even though no action had ever
been taken by the company against
an employee for violating the policy,
the NLRB said the policy illegally
prohibited discussion among coworkers
and union organizers of the
terms of their employment, a violation
of the NLRA.

The D.C. Circuit affirmed and
enforced the NLRB's order. The court
agreed that the confidentiality policy
was not drawn narrowly enough to protect
only information that the company
legally could require its employees to
hold in confidence. By its own terms,
the policy was broad enough to invade
the right of the employees to disclose
and discuss their terms of employment.
The court said the test is not whether
an employee actually has interpreted
the policy as preventing legally protected
disclosures but whether an employee
reasonably would understand that he or
she was prevented from such legally
protected discussion.

This decision is important for several
reasons. First, it reminds us that the
NLRA applies to unionized and
nonunionized employers. Employers
unfamiliar with the NLRA should
obtain a basic understanding of how
the act may affect them. Employer
organizations, the NLRB Web site and
legal counsel can help provide this
information.

Second, all employers should
review their confidentiality provisions
and similar language contained
in their employee handbooks
and other company documents
to ensure that they cannot
reasonably be construed to restrict
employees' rights to discuss with coworkers
employment terms and
working conditions.

Third, this evaluation will provide
an opportunity to review the scope and
relevance of the employer's confidentiality
policies and agreements to
determine if they address information
the employer needs to protect.

A narrowly drawn policy, consistently
applied, is more likely to be enforced
when it is needed than is a broad con-
fidentiality clause that is regularly
ignored.

Jonathan Cain is a member of the law firm
Mintz Levin in Washington. The opinions
expressed in this article are his. He can be
reached by e-mail at jtcain@mintz.com.

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