The NLRB’s Challenge To Bridgewater’s Confidentiality Clauses: Its Significance For Employers

locked case fileThe NLRB’s new focus on non-union employment has been well–chronicled here.  Employment contract provisions thought to be governed only by state contract law principles are now subject to the federal National Labor Relations Act and its unfair labor practice prohibition.  Recent NLRB activity concerning confidentiality provisions in hedge fund Bridgewater Associates’ standard employment contract underscores this development and furnishes an important lesson for all employers.

Provisions safeguarding a company’s trade secrets or competitively sensitive confidential business information are standard fare in many employment contracts.  Bridgewater’s provisions were more protective than most.  One such provision made the terms of the employee’s employment with the company confidential.  Another broadly defined “Confidential Information” to include any non-public information relating to Bridgewater’s business or affairs or those of any existing or former officer, director, employee or shareholder.  “Confidential Information” also included employee compensation information and information regarding the company’s organizational structure, including the general structure of its departments.  Another provision barred the disclosure of Confidential Information to “any media business,” with “media business” defined to include websites, blogs and social media outlets.

The challenge came via a June 30, 2016 unfair labor practice complaint the NLRB served on Bridgewater.  The NLRB charged that the provisions in question violated the contracting employees’ “Section 7 rights.”  Section 7 of the National Labor Relations Act (29 U.S.C. § 157) grants non-supervisory employees the right to form, join or assist unions, and the further right to engage in “other concerted activities” for their “mutual aid or protection.”  Employer conduct that interferes with, restrains or coerces employees in the exercise of these rights is an unfair labor practice prohibited by §8(a)(1) of the Act – and this is the charge the NLRB leveled against Bridgewater.

The Board’s theory is easy to explain.  The “mutual aid or protection” to which Section 7 refers relates to conduct concerning the employees’ wages, hours and other conditions of employment.  If employees are contractually forbidden to talk with other employees or perhaps even a union organizer (in person, electronically or even through social media) about their compensation or the other terms of their employment or just their dissatisfaction with their lot at work, they will never be able to engage in the concerted activity the Act authorizes and protects.

In October 2016, the NLRB withdrew its complaint.  There was no trial.  There was no ruling (by the administrative law judge who was to hear and decide the case).  This likely means  that Bridgewater settled, agreeing to make its confidentiality provisions less restrictive.

Confidentiality agreements with employees should not be designed to prevent the employees from talking with others about their wages, hours and other conditions of employment.  They should focus on truly confidential information about the business.  As a practical matter, prohibitions like Bridgewater’s rarely produce their desired effect, violations are difficult to detect, and disciplining violators raises a host of other issues.  Employers should review their confidentiality provisions to  make sure they are not so restrictive as to be unenforceable, and that they reflect a consideration of their employees’ Section 7 rights.