Supreme Court Rules on FOIA and the Protection of Sensitive Company Information
A recent Supreme Court case determined that private commercial and financial information that is transmitted to the federal government under an assurance of privacy is considered “confidential” and not subject to disclosure under the Freedom of Information Act (FOIA). The decision could provide some valuable safeguards for employers concerned about protecting sensitive data from public disclosure.
FOIA and Exemption 4
FOIA was enacted into law in 1967 to provide the public with a right to request information, data, or records held by federal agencies. However, FOIA is often used as a tool by the media, interest groups, and labor unions to obtain information, not just about federal agencies, but also about private sector employers that may be required by law to submit information to the government. In recognizing the need to balance disclosure and privacy, Congress created certain exemptions from disclosure, including “Exemption 4,” which prevents the government from disclosing “‘trade secrets and commercial or financial information obtained from a person and privileged or confidential’ 5 U.S.C. §552(b)(4).” In the case, the Court for the first time addressed what it means for information to be considered “confidential.”
The case involved a FOIA request directed to the U.S. Department of Agriculture (USDA) seeking the identities of all retail entities that participate in USDA’s food stamp program (Supplemental Nutrition Assistance Program [SNAP]), as well as each store’s SNAP redemption data for a five-year period. When USDA invoked Exemption 4, the plaintiff sued to compel release of the data. A federal district court and the Eighth Circuit Court of Appeals subsequently ordered USDA to disclose the data, ruling that there would be no “substantial competitive harm” to the retail entities.
The Supreme Court reversed, ruling that the “substantial competitive harm” standard had no basis in FOIA’s statutory text. Instead, the Court looked to the ordinary, contemporary meaning of the word “confidential” at the time Congress enacted FOIA. In doing so, the Court ruled that, “where commercial or financial information is both customarily and actually treated as private by its owner and provided to the government under an assurance of privacy, the information is ‘confidential’ within the meaning of Exemption 4” of FOIA.
What This Means for Employers
The ruling appears to create a two-part test to satisfy Exemption 4. First, the information must be kept private. In other words, an employer probably could not make information publicly available via other outlets and then claim that it should have been kept free from disclosure under the exemption. Second, the information must be provided to the government “under an assurance of privacy.”
It is not clear what this second component actually means. Take, for example, the recently resuscitated requirement for employers to include wage-and-hours-worked data about their employees as part of the EEO-1 report. The EEO-1 is shared by both the Equal Employment Opportunity Commission, which is statutorily prohibited from disclosing the reports, and the Office of Federal Contract Compliance Programs (OFCCP), which is under no similar prohibition. EEO-1 reports filed by federal contractors are therefore subject to FOIA requests directed to OFCCP, which has generally invoked Exemption 4 in the past. Many employers keep wage and salary information private, but what “assurance of privacy” do employers have from OFCCP that the agency will not disclose the reports? Employers might consider adding a disclaimer to their EEO-1 filings noting that the information contained therein is private and they expect the agency to treat it as such.