NLRB Upholds Confidentiality Clause in Settlement Agreement

S. Freedman & Sons (the Company), based in Landover, Maryland, distributes paper products and restaurant supplies to customers from Delaware to Virginia. It has 28 drivers who are represented by Teamsters Local Union No. 639 (the Union). 

On November 8, 2013, Richard Saxton, a 26-year employee who served as the Chief Union Steward for the last 17 years, received a traffic ticket for following another vehicle too closely and causing an accident. The Company investigated and determined that the accident caused damages exceeding $8,900. After terminating Saxton as permitted under the collective bargaining agreement, it agreed with the Union to reinstate him with some gift cards for lost income.

When Saxton reported to work, the Company told him that he would have to sign a “last chance agreement” before returning to work. Saxton refused and reported it to the Union. Ultimately, the Company and Saxton signed a settlement agreement pursuant to which he returned to work with a suspension for time served in exchange for Saxton agreeing to the following provision:  “I understand and agree that the terms of this Agreement will remain confidential and that any disclosure of this Agreement may lead the Company to take disciplinary action against me, up to and including the termination of my employment.”

An administrative law judge ruled that this provision violated Section 8(a)(1) of the Act because it waived Saxton’s Section 7 right to discuss discipline. The Company appealed by filing exceptions with the NLRB.

The NLRB Decision 

Members Miscimarra and Hirozawa overruled the ALJ. Although they conceded that employees have a Section 7 right to discuss their discipline with one another for the purpose of mutual aid and protection, they observed that the Board favors “private, amicable resolution of labor disputes, whenever possible” and has held that an employer “may condition a settlement on an employee’s waiver of Section 7 rights if the waiver is narrowly tailored to the facts giving rise to the settlement and the employee receives some benefit in return for the waiver.”

The majority acknowledged that the NLRB has found unlawful settlements “that prevent a signatory employee from exercising rights that are unrelated to the facts giving rise to the settlement.” But here, the majority found that the confidentiality agreement was narrowly tailored and that Saxton received a benefit in return for the waiver, namely reinstatement for a terminable offense. Although it is arguable that the confidentiality provision could conceivably affect Saxton’s right to assist other employees with future claims in his capacity as Shop Steward, “the Union itself retained the ability to share the terms with employees, as it was not bound by the confidentiality clause.”

Member McFerran dissented, arguing that in her mind, “the agreement plainly interfered with the Section 7 rights of Saxton and his coworkers to discuss workplace discipline and to act together to address disciplinary issues.”

Takeaways

This case is a refreshing departure from the Board’s recent assault on employee confidentiality requirements in certain settings. It confirms that narrowly tailored confidentiality provisions in settlement agreements can be enforced, and that employers must draft such clauses carefully.