Overbroad confidentiality agreements can spell doom

Broad confidentiality agreements,whether written into an employmentcontract or noted in a companypolicy manual, are so commonplacethat employees and employers usuallygive little thought to their content. If aquestion arises about an employee con-fidentiality agreement, it usually is howto make it more inclusive, not whetherthe policy is directed to maintaining theconfidence of genuinely sensitive information,or if it is even necessary.As a ruling from the U.S. Court ofAppeals for the D.C. Circuit earlier thisyear demonstrates, an employee confi-dentiality policy can cause legal problemsfor the employer if it is not narrowlytailored to a legitimate need. Thecourt ruled that an employer violatedthe National Labor Relations Actbecause it adopted an employee confi-dentiality policy that was so broademployees could reasonably construethe policy, which was backed with disciplinaryprovisions, to prohibit themfrom discussing the terms and conditionsof their employment with otheremployees. The NLRA protects suchdiscussion.In the D.C. Circuit case, the employeehandbook contained a confidentialitypolicy similar to many in the informationtechnology industry: "We honorconfidentiality. We recognize and protectthe confidentiality of any informationconcerning the company, its businessplans, its [employees], new businessefforts, customers, accounting andfinancial matters."Confidentiality language alsoappeared in the company's disciplinepolicy which warned employees thatthey could be disciplined "for violatinga confidence or [for the] unauthorizedrelease of confidentialinformation."The National Labor Relations Boardfiled an unfair labor practice chargeagainst the company, alleging that thebroad confidentiality policy interferedwith the employees' right to discussterms and conditions of their employmentwith others. This interferes withthe employees' right to organize andbargain collectively.Even though no action had everbeen taken by the company againstan employee for violating the policy,the NLRB said the policy illegallyprohibited discussion among coworkersand union organizers of theterms of their employment, a violationof the NLRA.The D.C. Circuit affirmed andenforced the NLRB's order. The courtagreed that the confidentiality policywas not drawn narrowly enough to protectonly information that the companylegally could require its employees tohold in confidence. By its own terms,the policy was broad enough to invadethe right of the employees to discloseand discuss their terms of employment.The court said the test is not whetheran employee actually has interpretedthe policy as preventing legally protecteddisclosures but whether an employeereasonably would understand that he orshe was prevented from such legallyprotected discussion.This decision is important for severalreasons. First, it reminds us that theNLRA applies to unionized andnonunionized employers. Employersunfamiliar with the NLRA shouldobtain a basic understanding of howthe act may affect them. Employerorganizations, the NLRB Web site andlegal counsel can help provide thisinformation.Second, all employers shouldreview their confidentiality provisionsand similar language containedin their employee handbooksand other company documentsto ensure that they cannotreasonably be construed to restrictemployees' rights to discuss with coworkersemployment terms andworking conditions.Third, this evaluation will providean opportunity to review the scope andrelevance of the employer's confidentialitypolicies and agreements todetermine if they address informationthe employer needs to protect.A narrowly drawn policy, consistentlyapplied, is more likely to be enforcedwhen it is needed than is a broad con-fidentiality clause that is regularlyignored.