Maybe you thought that employers whose employees are not organized in unions or which are not involved in traditional labor activities like strikes, lockouts and picketing are outside of the jurisdiction of the National Labor Relations Board (“NLRB”). If you did, you would be wrong.
Section 7 of the National Labor Relations Act, a depression era law, guarantees that employees have the right to join unions. It also establishes the fundamental right, without reference to unions, of employees “to engage in other concerted activities for the purpose of…mutual aid or protection.”1 Employers who interfere with that right are guilty of an unfair labor practice under Section 8(a)(1) of the Act.2
The NLRB alleged in a Complaint3 that Bridgewater Associates had violated this right by including in its employment agreements certain provisions, which, as we shall see, are a staple of individual employment contracts in the financial services industry. The NLRB’s action arose out of complaints of an employee, an adviser to large institutional investors in Bridgewater, who first contended that his male supervisor had sexually harassed him for about a year by propositioning him and trying to discuss sex during work trips. The employee alleged he was pressured to withdraw his harassment claims, accused of lying and criticized for“blowing he whole thing out of proportion.”
The employee ultimately withdrew his sexual harassment complaint, but instituted a charge with the NLRB, asserting that Bridgewater had suspended him indefinitely for threatening to file the NLRB charge. The allegations of sexual harassment and retaliation were widely reported, but another aspect of the NLRB’s Complaint against Bridgewater seemed to have potentially broader implications.
The NLRB also asserted that Bridgewater had interfered with the rights of its employees under Section 7 of the Act by including in Bridgewater contracts of employment the requirement that employees keep the contractual terms confidential, an overbroad definition of “confidential information,” a restriction on disclosing such confidential information without prior authorization, a prohibition on disparaging Bridgewater and a provision requiring that employees submit any dispute with Bridgewater to binding arbitration.
The NLRB’s allegations against Bridgewater are not completely novel. In fact, the NLRB under the current administration has as a matter of policy taken aggressive stands against restrictions in employment contracts that by now seem unremarkable in many industries, especially the financial services industry. In other words, while the NLRB may be reaching into industries it has traditionally avoided, the claims against Bridgewater are not wildly different from those it has made in the past against others.
In its Complaint, the NLRB was vague about the scope of the remedy it sought. However, there is no reason to believe that the agency is broadly targeting confidentiality provisions, non-disclosure agreements or arbitration clauses.
The courts and the NLRB itself have widely held that an employee’s rights under Section 7 need to be balanced against the employer’s interest in preventing disparagement of its products or services, protecting the reputation of its business and demanding loyalty of employees. Employees are denied the protection of the Act when they are unjustifiably disloyal or engage in defamatory communications or complain of matters not connected with a labor dispute.
So an employer could not utilize a confidentiality policy to bar employees from discussing their salaries, since such discussions would, according to the NLRB, qualify as a protected “concerted” activity. But that same policy could certainly prohibit disclosure of proprietary information, such as an investment strategy, a valuable asset which has no discernible relation to terms of employment. By the same token, an arbitration clause is an appropriate means to resolve most workplace disputes–indeed, the clause in Bridgewater’s agreement may have been the reason that its employee withdrew his sexual harassment complaint. However, arbitration would be inappropriate, at least in the NLRB’s view, as a forum for the adjudication of rights that employees, even non-union employees, assert for their “mutual aid or protection.”
Even in the face of an aggressive NLRB, employers still have the right to require that their employees respect the confidentiality of the vast majority of the information employers seek to protect, to demand employee loyalty and to have workplace controversies resolved through arbitration. Until there is a more employer-friendly NLRB in power, the challenge will be to draft contract clauses and policies that achieve legitimate objectives, but do not substantially impinge on employee associational rights.
1 27 U.S.C. §157.
2 29 U.S.C. §158(a)(1).
3 Bridgewater Associates, LP and Christopher Tarui, Case 01-CA-169426 (June 30, 2016).