August 21, 2019
A National Labor Relations Board (“NLRB”) administrative law judge recently held that a contractual clause requiring employees to keep information about arbitration confidential constitutes an unfair labor practice.
What Happened?
Pharmaceutical giant Pfizer, Inc. required its employees to consent to an arbitration agreement. As a condition of continued employment, the agreement contained a waiver of the employees’ rights to sue Pfizer in court, as well as a waiver of the right to file a class or collective action against Pfizer in any forum. The agreement further required employees to pursue arbitration in order to bring a claim against the company. The agreement also included a confidentiality clause that prohibited employees from discussing any arbitration proceedings or arbitrator’s award.
A limiting sentence immediately followed the confidentiality clause, and stated that the clause would not prohibit employees from “engaging in protected discussion or activity relating to the workplace, such as discussions of wages, hours, or other terms and conditions of employment.”[1] In response to the arbitration agreement, two Pfizer employees filed unfair labor practice charges.
On March 21, 2019, NLRB Judge Keltner Locke held that Pfizer violated its employees’ Section 7 National Labor Relations Act (“NLRA”) rights to discuss and publicly disclose the terms and conditions of their employment. As a result, Judge Locke found that Pfizer violated Section 8(a)(1) of the NLRA when it imposed the confidentiality clause. Section 7 guarantees employees the right to engage in “concerted activities” for the purpose of collective bargaining or other mutual aid or protection.[2] Section 8(a)(1) explains that it is an unfair labor practice for an employer to interfere with or restrain employees in the exercise of their Section 7 rights.[3]
Employers May Not Force Employees to Waive Substantive Rights
Judge Locke emphasized the distinction between procedural and substantive rights, citing U.S. Supreme Court precedent. The Supreme Court previously held that an individual may waive a “procedural right,” such as having a case decided by a court, but may not be forced to waive a “substantive right,” such as being paid at least the minimum wage. Judge Locke reasoned that the right to discuss arbitration proceedings is substantive because it protects activity that, in the Supreme Court’s words, employees “just do.” As a result, discussions about arbitration fall within Section 7 protection.
Judge Locke also distinguished the present case from the Supreme Court’s decision in Epic Systems Corp. v. Lewis.[4] There, the Court held that arbitration agreements that include class action waivers are lawful and enforceable. The Court reasoned that Section 7 does not protect the right to pursue class actions because such a right would be procedural in nature, while Section 7 instead protects employee activity. Here, the NLRB judge reasoned that employees have the right to discuss with each other all their terms and conditions of employment, including arbitrations, to disclose these terms and conditions to the public, and to ask for the public’s support in changing them for the better.
The Epic Systems decision thus did not support Pfizer’s enforcement of the confidentiality clause. According to Judge Locke, “Just as there is a difference between playing baseball and talking about a baseball game, arbitration and an employee discussion about arbitration are two different things. Court decisions allowing an employer to force employees to use arbitration do not serve as precedents for the separate proposition that an employer can prohibit employees from talking about it.”[5]
A Limiting Sentence Will Not Save a Confidentiality Clause
The NLRB judge also explained that the limiting sentence immediately following the confidentiality clause could not sufficiently “remove the sting” of the clause.[6] Pfizer argued the limiting sentence assured that the confidentiality clause would not unlawfully restrict Section 7 rights. However, Judge Locke disagreed, and explained that the confidentiality clause contained explicit language requiring that any arbitration and award be kept confidential. The vague, general language of the limiting sentence did not create an exception to confidentiality, so employees could reasonably conclude that they were prohibited from discussing any aspect of arbitration. Therefore, the limiting sentence did not save the confidentiality clause.
Public Policy Implications
Judge Locke highlighted the case’s public policy implications in his decision. He found that the confidentiality clause created an “inequality of power” between Pfizer and its employees.[7] He also reasoned that enforcement of the confidentiality clause would demean and diminish a strong public policy against disproportionate bargaining power between employers and employees, which Congress emphasized in the NLRA. Ultimately, he found telling employees to choose between “your rights or your job” is sufficiently coercive to offend that public policy.
The confidentiality clause here also prohibited employees from discussing a condition of employment. Essentially all “concerted activity” begins with employees talking about working conditions. For example, if employees are unaware of a work-related problem, they cannot decide to take concerted activity to address it, and they cannot even be aware of the problem unless employees can freely discuss it. According to the NLRB’s decision, “[a]n order forbidding employees from talking thus nips protected activity not just in the bud but even before the bud.”[8]
What Does This Mean for You?
In light of the NLRB’s decision, employers who utilize arbitration agreements must be mindful that their employees have a Section 7 right to discuss and disclose any work-related arbitrations and an arbitrator’s award. If an employee discusses such information, the employer must not take any disciplinary or adverse action against the employee.
Going forward, employers must not draft confidentiality clauses that require employees, as a condition of continued employment, to remain silent regarding any arbitrations. Even a limiting sentence that guarantees employees will be free to “engage in protected discussion or activity relating to the workplace” will not “undo” the confidentiality clause’s restriction of employee rights.
However, arbitration agreements that require employees to waive their right to sue an employer in court, or waive their right to file a class action, remain lawful and enforceable.
[1] Pfizer, Inc., N.L.R.B. 10-CA-175850 at *3 (Mar. 21, 2019) (ALJ).
[2] 29 U.S.C. § 157(1947), https://www.nlrb.gov/rights-we-protect/whats-law/employers/interfering-employee-rights-section-7-8a1.
[3] 29 U.S.C. § 158(1974), https://www.nlrb.gov/rights-we-protect/whats-law/employers/interfering-employee-rights-section-7-8a1.
[4] Epic Systems Corp. v. Lewis, 138 S. Ct.1612 (2018).
[5] Pfizer, Inc.,N.L.R.B. 10-CA-175850 at *13 (Mar. 21, 2019) (ALJ).
[6] Id. at *39.
[7] Id. at *26
[8] Id. at *44
If you have questions concerning this topic, or would like to discuss in further detail, please contact Meghan DiPasquale.
Authors: Meghan DiPasquale, Christine Naassana (2019 Summer Associate, University at Buffalo Law School Class of 2020)