NLRB Upholds Last-Chance Agreement Containing Confidentiality Clause

NLRB RulesIt is well-settled that union-represented employees have a right to discuss their terms and conditions of employment with other employees and even non-employees. This right extends to discussions about an employee’s discipline; that is, employees generally are free to discuss the discipline they have received with other employees. The obverse is also the law under the National Labor Relations Act (NLRA): an employer cannot prohibit employees from discussing their terms and conditions of employment, including discipline, without running afoul of the NLRA.

There is a limited exception to the above rule. “[I]n certain circumstances, an employer may demonstrate that a confidentiality rule is based on a ‘substantial and legitimate business justification’ that ‘outweighs the rule’s infringement on employees’ rights.’” Caesar’s Palace (NLRB 2001).” A legitimate business justification can be shown, for example, where the company needs to protect the safety of witnesses, maintain evidence, or measure the veracity of witness statements.

These principles became a bit murkier, however, under a recent National Labor Relations Board (NLRB) decision. In S. Freedman & Sons, Inc. (NLRB 2016), Richard Saxton was a 26-year bargaining unit employee. During 17 of those 26 years he had been the chief union steward.  The company had a policy that permitted immediate termination where an employee caused more than $2,000 in damages to company property.

Saxton got into a vehicular accident while on the job. He caused more than $8,900 in damages and was ticketed for following too closely. The company conducted its investigation and then terminated Saxton. After a meeting with the union, however, the company agreed to reinstate him.

When Saxton next reported to work, the company tendered him a last-chance agreement, but Saxton refused to sign it. In response, the company suggested to the union that it convert Saxton’s termination to a suspension if Saxton would agree not to discuss the terms of the settlement. The union agreed to consider the proposed settlement.

Instead of drafting the settlement and presenting it to the union, the company tendered it directly to Saxton, who signed it. The settlement stated, “I waive my right to file a grievance against the company regarding this termination or suspension. I understand and agree that the terms of this agreement will remain confidential and that any disclosure of this Agreement may lead the company to take disciplinary action against me, up to and including the termination of my employment.”

The union filed one of many unfair labor practice charges alleging that requiring Saxton to sign a confidentiality agreement infringed on his Section 7 rights. The Administrative Law Judge (ALJ) agreed, holding that the confidentiality agreement was invalid.

The NLRB, however, disagreed and reversed the ALJ’s decision. The NLRB reasoned that the confidentiality provision was narrowly tailored and prohibited Saxton only from discussing the driving accident. The NLRB also noted that it favors private settlements among employers and unions.

While the NLRB’s holding in this case may at first blush appear to be favorable to employers, we believe it creates more confusion than it resolves. Even a dissenting NLRB Board Member opined that the Company did not offer any evidence, and the NLRB did not point to any such evidence, that the company’s confidentiality provision was supported by a “substantial and legitimate business justification that outweigh[ed]” Saxton’s Section 7 rights.

The lesson here is that requiring employees to maintain confidentiality over terms and conditions of employment is a rapidly evolving issue before the NLRB.  Violations, especially in the context of terminations of employment, can be costly. This case appears to depart from previous NLRB law without any factual analysis to guide employers. Accordingly, employers should tread carefully and consult with counsel before requiring employees to maintain workplace confidentiality.