Contract Overreaching and the DC Circuit's Quicken Loans Decision

A great deal has been written about the D.C. Circuit Court's decision in Quicken Loans, Inc. v. NLRB. That case enforced the National Labor Relations Board's order striking down portions of an employment non-disclosure clause and related non-disparagement provision.

The court's strongly worded ruling, which can be found here, provides a template for how employer can get into trouble by trying to coerce certain behavior in the workplace - even if that workplace is not unionized. Indeed, the NLRB's foray into non-union activity is one of the more notable employment law developments over the past few years. Quicken Loans just brings together many of these policies in a judicial opinion from the nation's most important appeals court.

To take a step back, Section 7 of the National Labor Relations Act enables employees to engage in concerted activities for the purpose of collective bargaining. These guaranteed rights, so the reasoning goes, allow employees to communicate about forming a union and about improving the terms and conditions of their employment.

So how do non-disclosure and non-disparagement clauses fit into this equation? As for the former, many restrictions contain overly broad definitions of "confidential information." The Quicken Loans policy was no different; it prohibited use of non-public employee information and all personnel lists (including e-mail addresses, cell phone numbers, and the like). The court of appeals easily found that this type of information "has long been recognized as information that employees must be permitted to gather and share among themselves and with union organizers in exercising their Section 7 rights."

As to the latter - non-disparagement clauses - Quicken Loans stumbled when it barred employees from criticizing the company in any oral or written statement, including any internet postings. Calling this clause a "sweeping gag order," the court had little trouble concluding it too violated the NLRA. Its internal procedure designed to enable employees to redress complaints did not provide any kind of a safe harbor since it, by definition, forbade a public airing of grievances.

The Quicken Loans decision certainly underscores the need for employers to stop with the overreaching. Indeed, many of these paternalistic clauses find their way into employment contracts with almost no forethought. Lawyers who encourage corporate clients like Quicken Loans to load up on prophylactic policies often ought to consider what message is being sent and what precisely there is to gain.

As a general rule, then, employers should not be enacting policies, handbook statements, rules, or form agreements that do any of the following:

• Broadly define "confidential information" to include employee data of the kind typically needed for employees to communicate with each other about the terms and conditions of their employment;
• Bar employees from criticizing the employer;
• Prohibit employees from disclosing the terms of their employment, such as salary and benefits; and
• Prohibit employees from disclosing the terms of their restrictive covenants.

This last point is something I see quite often. Frequently, I see contracts that prevent an employee from revealing that she has a non-compete and what it says. I don't get this. Why? What's the point? Is it included because some lawyer read somewhere that it might be a good idea? Is that a sufficient reason?

Much of the law is, quite frankly, common sense. If it sounds off, it probably is. No doubt many management and employment attorneys are up in arms about Quicken Loans, but read it. The court speaks in somewhat caustic terms. You get the sense they're saying this wasn't a close case. Attorneys shouldn't run into the problems noted in Quicken Loans if they simply apply real-world experience and understand that not every remote unrealized fear needs to be embodied in a contract term.