In a recent decision issued on March 21, 2019, an administrative law judge (ALJ) held that confidentiality clauses in arbitration agreements violate the National Labor Relations Act (the Act). Specifically, the ALJ held that such provisions run afoul of section 8(a)(1) of the Act, and unlawfully require a waiver of employees' rights under section 7 of the Act to discuss and publicly disclose their terms and conditions of employment. Many may view rulings like this as yet another attack on otherwise lawful arbitration agreements.
In the matter before the ALJ, an employer had lawfully required its employees to enter into an arbitration agreement as a condition of continued employment. The arbitration agreement included a confidentiality clause. The confidentiality clause provided, in part: "The parties shall maintain the confidential nature of the arbitration proceeding and the award, including all disclosures in discovery, submissions to the arbitrator, the hearing, and the contents of the arbitrator's award[.]"
Although the confidentiality clause, as written, appeared to impose a duty of secrecy rather than a prohibition on disclosure, the ALJ instructed that employees would nonetheless reasonably understand the clause's message to be one prohibiting them from discussing or disclosing information pertaining to the arbitration or arbitral award. Further still, the clause would reasonably cause employees to believe that they could be disciplined if they were to disclose the information.
It is well settled that section 7 of the Act grants employees the right to discuss working conditions among themselves. Section 7 also allows employees to disclose those working conditions to the public as part of concerted activity protesting those conditions. In this case, the ALJ reiterated, "Prohibiting employees from speaking publicly about working conditions cuts to the quick of Section 7 and therefore, absent a legitimate and sufficient business justification, violates Section 8(a)(1) of the Act." Because – in the circumstance before the ALJ – the arbitration agreement was a condition of continued employment, and its confidentiality clause prohibited employees from discussing what happened during an arbitration, the ALJ stated that the clause clearly chilled the exercise of employees' section 7 rights and violated section 8(a)(1) of the Act.
Although the enforceability of employment-related arbitration agreements has recently gained support from the U.S. Supreme Court in Epic Systems, this most recent National Labor Relations Board (NLRB) decision may have a significant impact on both unionized and non-unionized employers who rely on arbitration agreements. Accordingly, employers must be mindful that although their arbitration agreements may remain lawful, the clauses within them are still subject to scrutiny by the NLRB.
As the ALJ's decision may be subject to further review by either the NLRB or the federal court of appeals, employers are encouraged to consult with outside counsel when reviewing the legal soundness of both new and existing employee arbitration agreements.
This article is presented for informational purposes only and is not intended to constitute legal advice.
