The Fifth Circuit Court of Appeals has affirmed a finding of the National Labor Relations Board (“NLRB”) that a confidentiality clause that defines “confidential information” to include “financial information, including costs, prices . . . [and] personnel information” among other items was overly broad and restricted the rights of non-managerial employees to engage in concerned activity under Section 7 of the National Labor Relations Act (“NLRA”) to discuss the terms and conditions of their employment for “collective bargaining or other mutual aid or protection.”  The decision in Flex Frac Logistics, LLC v. National Labor Relations Board (5th Cir. March 24, 2014) is consistent with previous NLRB decisions and advice memoranda, but is significant because the Fifth Circuit Court of Appeals deferred to the NLRB on this interpretation.  The Court held, in part, that references to “financial information” could be reasonably viewed to include information about wages, and also found the reference to “personnel information” to be overly broad.

Non-compete counsel who do not practice traditional labor law and who have not been following these developments may be surprised to learn that seemingly innocuous confidentiality agreements may run afoul of the NLRA with respect to non-managerial employees.  For those who have been following this issue, the decision serves as a reminder that old fashioned confidentiality agreements given to non-managerial employees that include a laundry list of examples of “confidential information” may require a surgeon’s scalpel, either to remove generalized references to “personnel information” or “financial information,” and/or to utilize safe harbor language clarifying that the proscription is not meant to prohibit the non-managerial employees from discussing personnel information with other employees or with third parties who are not future employers or competitors of the employer.  The NLRB, however, has previously indicated that a simple statement that a policy “does not deny any rights provided under the National Labor Relations Act to engage in concerted activity” may not be sufficient to bring an otherwise unlawful policy into compliance. American Red Cross Blood Services, Western Lake Erie Region, case number 08-CA-090132 (June 4, 2013). These NLRA concerns would not apply to individualized executive agreements or policies for upper-level managerial employees.

Companies will therefore continue to struggle to reconcile the collision of collective bargaining rights of non-managerial employees, with the employer’s right to protect trade secrets and confidential business information, until further guidance is provided by the courts.