In Flex Frac Logistics, LLC, 358 NLRB No. 127 (2012), the National Labor Relations Board (in a decision later upheld by a federal appeals court in New Orleans) held the employer’s confidentiality policy was unlawfully overbroad, and, as a result, could inhibit employees from discussing terms and conditions of employment (i.e., wages, benefits, and the like). Thus, according to the Board, the policy violated employees’ right to discuss these issues under Section 7 the National Labor Relations Act (NLRA). (See our article, Policy Restricting Employees from Discussing Wage Info with Outsiders Ruled Unlawful.)

Now, however, the Board has upheld an Administrative Law Judge’s decision recommending dismissal of a separate allegation, that an employee’s discharge pursuant to the unlawful rule also violated the NLRA, thus sustaining the discharge. Flex Frac Logistics, LLC, 360 NLRB No. 120 (2014).

The employer’s policy, of which its employees were aware, was to keep its client rates confidential to prevent competitors from underbidding the employer and to prevent the employer’s subcontractors from increasing their charges based on the rates the employer was charging its customers. 

An employee in the employer’s accounting department used her position to access the employer’s client rates. When she tried to show them to a co-worker, the co-worker reported the conversation to his supervisor who, in turn, informed higher management. Within days, the employer received calls from two of its subcontractors claiming to know the rates the employer was charging its customers and demanding more money to perform the employer’s deliveries based on those rates. 

The employer discharged the employee, believing she had informed the subcontractors of the customer rates. The employee charged the employer had unlawfully discharged her pursuant to the overbroad confidentiality policy. 

Applying its decision in Continental Group, 357 NLRB No. 39 (2011), that discipline pursuant to an overbroad rule is unlawful if the employee was engaged in protected activity or was engaged in conduct that “. . . otherwise implicates the concerns underlying Section 7,” the Board found the discharge was lawful. 

Although the second (“otherwise implicates”) prong of the Continental Group test may have been fulfilled, the NLRB held nevertheless that because the employer had a legitimate confidentiality interest in its client rates and it reasonably believed the employee deliberately betrayed the employer’s articulated confidentiality interest and harmed its business, the employee’s dismissal pursuant to the rule was lawful. 

The Board deemed irrelevant the employee’s denial that she had disclosed the rates and the absence of proof that in fact she had violated the employer’s rule. According to the Board, because the employer had a reasonable belief that the employee had violated the policy, the discharge was lawful even if the employee had not disclosed the rates. 

The Board also concluded that the employee’s discharge would not chill other employees’ Section 7 rights. Other employees, to the extent they were aware of what happened to the offending employee, would determine the employee was discharged for gross misconduct and not because of the application of the unlawful confidentiality rule, the Board stated. 

Therefore, even if an employer’s policy or rule is found to violate the NLRA, all is not lost. That policy or rule still may be enforced, even to the point of discipline or discharge, as long as the conduct to which the enforcement is directed does not implicate Section 7 rights.