Providing Legal Services For More Than 125 Years

Wage And Benefit Confidentiality

On Behalf of | Jul 6, 2011 | Employment Law

Employers generally cannot prohibit employees from discussing their wages and benefits among themselves or with current or potential union representatives. This is the case even if the employer is not a union shop. This point was the subject of a decision from the First Circuit Court of Appeals on June 22, 2011 in the case of National Labor Relations Board v. Northeastern Land Services, Ltd, d/b/a as The NLS Group. The First Circuit Court of Appeals hears appeals from the federal Massachusetts and New Hampshire Courts and therefore its rulings are an important precedent for both Massachusetts and New Hampshire employers and employees alike.

NLS is a temporary employment agency located in East Providence, Rhode Island that supplies its employees to its clients in the natural gas and telecommunications industry. NLS pays its employees directly, and bills their clients for their services. As such, NLS thought it important to have a confidentiality clause where employees would not share with the client what they are being paid in that the mark up between the labor cost and the client cost was proprietary information of NLS. Towards that end, NLS created a temporary employment contract with its employees that stated in relevant part:

“Employee . . . understands that the terms of this employment, including compensation, are confidential to Employee and the NLS Group. Disclosure of these terms to other parties may constitute grounds for dismissal.”

Dupuy was employed by NLS as a right-of-way agent for the acquisition of land rights by clients. At one point, Dupuy was working for one of NLS’ clients, El Paso Energy. Dupuy had issues with delayed paychecks, the timing of being paid for expenses, as well as his per-day reimbursement for computer usage. Dupuy contacted El Paso’s representative to complain about how he was being paid by NLS. NLS found him to be disruptive, but ultimately acknowledged that it fired him for breaching the confidentiality provision of his temporary employment contract. Dupuy filed an unfair labor practice complaint alleging NLS violated the National Labor Relations Act by maintaining and enforcing an unlawful confidentiality clause in its employment contract that discouraged employees from engaging in protected concerted activities and by terminating Dupuy’s employment for violating the terms of that clause.

While the Court ultimately found NLS’ reasoning for the confidentiality provision was to protect its proprietary information on bidding strategies with its clients, it supported the National Labor Relation Board’s decision ordering a rescission of that contract provision and a reinstatement of Dupuy’s employment.

The National Labor Relations Board, in enforcing the National Labor Relations Act, seeks to protect employees’ rights to engage in concerted activities for the purpose of collective bargaining or mutual aid or protection. That includes talking amongst each other and possible potential union representatives about their compensation and other benefits. While those rights do not include the right to talk to clients about how much they are being paid, the Board is concerned as to whether or not an overly broad confidentiality clause would discourage employees from talking amongst each other or union representatives. The confidentiality clause in this case, in part, stated disclosure of these terms to other parties may constitute grounds for dismissal. NLS had the option of providing a more narrow confidentiality clause which expressly stated that discussion of their wages or benefits with clients of this temporary employment agency was prohibited. Had NLS had such a more narrowly written confidentiality clause, there could very well have been a different result and Dupuy may have lost his unfair labor practice claim.

For employers, this case is instructive that even if you are not a union shop, you cannot force employees not speak about their wages and benefits with their fellow employees. If you are seeking to prohibit employees from talking about their wages and benefits to clients or the general public, it is best to speak with your employment counsel to ensure that the written confidentiality clause or policy created clearly does not forbid the employees’ right to discuss amongst themselves the wages and benefits for purposes of concerted activity with management. For employees, this case is instructive that just because you have a right, it does not mean you should always use it. In certain occupations, professionalism will discourage sharing with other employees how much you make in that you may cause a rift between you and your fellow employees or with management. While you may have legal rights, in the above case, Dupuy was fired in October 2001 and this decision did not come out until June 2011. Many employees would determine that a decade of litigation, and the costs associated therewith, is not worth the outcome.

J. Daniel Marr is a Director and Shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Attorney Marr is licensed and practices in both New Hampshire and Massachusetts. Attorney Marr can be reached at [email protected].