Labor & Employment Law Daily Insurance company’s code of conduct requiring employees to preserve confidentiality of information lawful
News
Thursday, January 2, 2020

Insurance company’s code of conduct requiring employees to preserve confidentiality of information lawful

By Ronald Miller, J.D.

When evaluating a facially neutral policy, the Board will strike the proper balance between the asserted business justifications and the invasion of employees’ rights in light of the Act and its policies, focusing on the perspective of employees.

An employer’s Code of Conduct, which required employees to maintain the confidentiality of confidential information, was lawful under a Boeing Co analysis, ruled a three-member panel of the NLRB. The Code of Conduct did not specifically designate as confidential terms and conditions of employment or, more generally, employee information, and so the Board failed to see how it affected the employees’ Section 7 rights. Moreover, the Board agreed with the employer that a remedial order to rescind its confidentiality agreement was unnecessary, but a rescission order for an employer memorandum was necessary (National Indemnity Company, December 18, 2019).

Confidentiality rules. The employer, an insurance company, maintained several rules requiring employees to preserve the confidentiality of certain information. On January 1, 2016, the employer distributed its Code of Conduct to employees and placed it on its intranet. Since at least 2009, the employer has required employees to sign a confidentiality agreement. The confidentiality agreement restricted the disclosure of several types of information, including “personnel information.”

However, on December 20, 2016, the employer distributed an updated version of the confidentiality agreement, deleting “personnel information” from the categories of information deemed confidential. It also added language specifically informing employees that nothing in agreement prohibited them from discussing wages, benefits, hours, or other terms and conditions of employment. The new language further stated that employees have the right to engage in or refrain from engaging in protected activities.

Finally, from July 21, 2009, to December 20, 2016, the employer distributed a memorandum signed by its president along with the confidentiality agreement. The memo emphasized the importance of preserving the confidentiality of confidential information the employer created and information it received from others. It stopped distributing the memo when it began distributing the revised confidentiality agreement in December 2016, but it did not notify employees that it was no longer operative.

An administrative law judge found that all three of the policies, including the Code of Conduct, the confidentiality agreement and the memo, were unlawful under Lutheran Heritage Village-Livonia. Subsequent to the ALJ’s decision, the Board overruled Lutheran Heritage in Boeing Co. Excepting to the law judge’s finding that the Code of Conduct was unlawful, the employer argued that it was lawful under both Lutheran Heritage and Boeing. It did not except to the ALJ’s finding that the confidentiality agreement and memorandum were unlawful but argued that the law judge erred in ordering rescission of those documents.

Neutral policy. In Boeing, the Board held that “when evaluating a facially neutral policy, rule, or handbook provision that, when reasonably interpreted, would potentially interfere with the exercise of NLRA rights, the Board will evaluate two things: (i) the nature and extent of the potential impact on NLRA rights, and (ii) legitimate justifications associated with the rule.” The Board will delineate three categories of employment policies:

  • Category I includes rules that the Board designates as lawful to maintain;
  • Category II includes rules that warrant individualized scrutiny as to whether the rule would interfere with NLRA rights; and
  • Category III includes rules that the Board will designate as unlawful to maintain because they prohibit or limit NLRA-protected conduct, and the adverse impact on NLRA rights are not outweighed by justifications associated with the rule.

Code of Conduct. The ALJ conceded that the Code of Conduct did not specifically designate as confidential terms and conditions of employment or, more generally, employee information. While the Board agreed with the ALJ that employees have a Section 7 right to discuss their terms and conditions of employment among themselves and the public, it failed to see how the Code of Conduct affected those rights. Reasonably interpreted from the perspective of an objectively reasonable employee, the Code of Conduct referred to the employer’s own confidential records or records that the employer otherwise may lawfully conceal.

The Code of Conduct provision was lawful because it did not, when reasonably interpreted, interfere with the exercise of Section 7 rights. Further, the Board designates rules that require employees to maintain the confidentiality of non-public information that could, if disclosed outside the company, cause harm to the company or its customers or benefit its competitors as Boeing Category 1(a) rules that are lawful to maintain “because, when reasonably interpreted, they would have no tendency to interfere with Section 7 rights and therefore no balancing of rights and justifications is warranted.”

To qualify for Category 1(a), a rule must either (1) omit from coverage, expressly or implicitly, wages, salaries, and other terms and conditions of employment or, more generally, employee or personnel information, or (2), if it includes wage or salary information, make clear that the information referred to is limited to data maintained and only accessible in the employer’s confidential records.

Interested in submitting an article?

Submit your information to us today!

Learn More
Employment Law Daily

Labor & Employment Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on labor and employment legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.

Free Trial Learn More