NLRB Judge Recommends Nixing Confidentiality Clauses in Arbitration Agreements

On March 21, 2019, a National Labor Relations Board (NLRB) administrative law judge recommended the NLRB make an employer eliminate the confidentiality policy contained in its arbitration agreements with its employees.  The NLRB judge further supported his recommendation by stating employers cannot bar workers by way of confidentiality provisions in arbitration agreements from discussing the outcome of employment arbitration because confidentiality provisions infringe on workers’ National Labor Relations Act (NLRA) rights to discuss an employment term related to their pay. 

DOES THE NLRA PROHIBIT CONFIDENTIALITY AGREEMENTS?

As a general proposition, the NLRA has traditionally been read to let workers talk about, and push to improve, work conditions among themselves.  The March 21st recommendation relies heavily on this concept as its basis for removing the power of confidentiality provisions in arbitration agreements when the issue in dispute has to do with the employee’s term or condition of employment, like a wage and hour dispute.  This conclusion comes on the heels of a May 2018 United States Supreme Court decision upholding the enforceability of arbitration agreements to resolve disputes between employers and employees despite arguments that such agreements violated the NLRA.  That case was viewed as a win for employers because it closed off a path that allowed workers to avoid arbitration agreements and it reduced employees’ abilities to establish class action lawsuits against employers. 

The NLRB judge distinguished his recommendation from the May 2018 case by noting that his decision centers on clauses making workers keep quiet about arbitration disputes, a substantive employee right, while the May 2018 lawsuit centers on contracts making workers bring claims in arbitration, a procedural employee right.  Proponents of the NLRB recommendation argue that failing to allow employees to discuss what happens in arbitration shields sexual harassers and other bad actors from being held accountable and could stifle other employees and co-workers from coming forward based on similar situations.        

WHAT IS THE TAKEAWAY FOR EMPLOYERS?

If this decision is appealed, and the NLRB affirms, employers will need to be aware confidentiality provisions within arbitration agreements hold no weight.  While some arbitration issues may still be subject to a confidentiality clause if the issue of the arbitration does not fall into the purview of work conditions, it is better to defend under the assumption that the provision will not be enforced.  While this decision would not eliminate the requirement that an employee use arbitration rather than start or join a class action, it could cause some employee morale issues, especially if there are pay discrepancies.  Employers should always be reviewing and updating job description, pay, benefits and company policies to ensure that all are compliant and in line with the company’s vision.  The best way to avoid having to determine if a confidentiality provision in an arbitration agreement is enforceable is to be proactive and try to eliminate these issues before they escalate to an arbitration proceeding.

If you have any questions regarding the NLRB’s recommendation, proactive steps to avoid arbitration or would like a comprehensive review of company policies, please contact your Thompson Coe attorney at (651) 389-5000 or at myHRgenius@thompsoncoe.com.  You can also find additional information and tips for your company and HR professionals at https://myhrgenius.co.            

 
 

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