Friday, June 19, 2020: NLRB Rules Confidentiality Provisions in Arbitration Clauses Relating to the Rules Under Which an Arbitration May be Conducted are Permissible
In an opinion issued on June 19, 2020, the National Labor Relations Board (“NLRB”) in California Commerce Club, Inc., 369 NLRB No. 106 held that confidentiality provisions contained in an employment arbitration agreement that preclude the disclosure of the award or decision made in an arbitration proceeding, as well as the evidence presented during such proceeding, do not violate the National Labor Relations Act (“NLRA”). The Board thus reversed an Obama-era decision and has now returned NLRB law to that which had been in place for almost 80 years without controversy until the Obama-era decision.
The NLRB’s decision overturned its prior Order issued June 16, 2016 in the same case, in which the NLRB had adopted the Administrative Law Judge’s decision finding the provision violative of Section 7 of the NLRA as an overly-broad “workplace rule that prohibits the discussion of terms and conditions of employment.” In issuing its new Order following remand of California Commerce Club’s appeal to the U.S. Court of Appeals for the District of Columbia Circuit, the NLRB relied upon two factors:
- First, the NLRB looked to the reasoning in the U.S. Supreme Court’s decision in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018), related to the Federal Arbitration Act (“FAA”) and the deference that a court should show to an FAA-enforceable arbitration contract.
- Second, the NLRB applied its new standard for determining whether a facially neutral work rule, when reasonably interpreted, would unlawfully interfere with, restrain, or coerce employees in the exercise of their NLRA rights.
Acknowledging that an employee’s ability to communicate with other employees about events, facts, and circumstances surrounding the terms and conditions of employment lie at the very heart of protected Section 7 activity related to engaging in “concerted activities for the purpose of collective bargaining or other mutual aid or protection,” the NLRB nonetheless determined that confidentiality provisions related to how the parties conduct an arbitration relates solely to the arbitration itself, and such provisions are subject to rigorous enforcement under the FAA. In other words, in balancing the competing interests at work, the NLRB found that the shield the FAA provided, along with the need to protect confidentiality in arbitration, outweighs the ability to report information disclosed during the arbitral process. The NLRB believed this especially true given that confidentiality provisions do not prohibit a party from disclosing information outside of arbitration if it possesses such information independent of the arbitral proceeding.
In light of this ruling, employers may take comfort in knowing that arbitrations remain confidential in nature. However, employers are cautioned to seek legal counsel in the proper drafting of arbitration agreements to ensure that the language of the confidentiality requirements are not overly-broad. For example, as a practical guidance, information an employee may know before going to arbitration, and subsequently presents as evidence in arbitration, is not subject to confidentiality outside of the arbitration given that the employee was aware of such evidence outside of the arbitral forum, and such information retains the protections guaranteed under Section 7 of the NLRA. It is only when the employee attempts to discuss the information in the context of its use as evidence in the arbitration, or the employee discloses information learned only through arbitration, does the employee violate the confidentiality requirements.