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Are Confidentiality Agreements Governed by Federal or State Law? Google Lawsuit May Turn the Tide Against Tech Giant

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The National Labor Relations Act (NLRA) governs “labor relations,” i.e., the process of workers engaging in collective action or forming a union. Since the NLRA is a federal law, it normally overrides or “preempts” state laws that might also touch upon labor relations. The U.S. Supreme Court explained this preemption rule in a landmark 1959 case, San Diego Building Trades Council v. Garmon, and today it is commonly referred to as “Garmon preemption.”

There is, however, a “local interest exception” to Garmon preemption. Basically, when a state has a “significant interest” in protecting its citizens from certain conduct, and the “exercise of state jurisdiction” over that conduct would not interfere with federal authority, a state court can still hear disputes related to that conduct.

Court of Appeals: State Lawsuit Does Not Interfere with NLRB Settlement

The California First District Court of Appeals recently addressed the application of the local interest exception to a lawsuit, Doe V. Google, brought against Internet giant Google, one of the state’s most prominent employers. The crux of the lawsuit is Google’s alleged use of “confidentiality agreements” to censor employee speech. Google maintained the National Labor Relations Board previously exercised its exclusive jurisdiction over this matter. But the First District concluded otherwise and held that the lawsuit could proceed.

According to the plaintiffs, Google required them to sign confidentiality agreements that, among other things, prevented them from “disclosing their wages in negotiating a new job with a prospective employer, and from disclosing who else works at Google and under what circumstances such that they might be receptive to an offer from a rival employer.” Read literally, the plaintiffs said the confidentiality agreement would not allow an employee “to reassure their parents they are making enough money to pay their bills,” as that would technically be disclosing wages to an outside party.

One of the plaintiffs, identified only as John Doe, also filed a complaint with the National Labor Relations Board (NLRB). The NLRB conducted an investigation and ultimately reached a settlement with Google. That settlement required” Google to notify employees that they had the right “to discuss wages, hours, and working conditions with other employees, the press/media, and other third parties.”

While the NLRB settlement may have resolved allegations of illegal conduct under the NLRA, the plaintiffs’ lawsuit alleged violations of California state labor laws. And as the First District noted, the NLRB’s jurisdiction covers the “mutual action” of employees, whereas this lawsuit addresses the protected activities of “individuals,” as opposed to a union. The appellate court therefore said there was no question this lawsuit raised a question of “local interest.” And since the NLRB’s settlement included no finding of liability, there was no risk that a state court would issue a conflicting finding that would undermine federal jurisdiction.

Has Your Employer Asked You to Sign a Confidentiality Agreement?

The aggressive use of confidentiality agreements has become an all-too-common practice in California’s tech sector. Lawsuits such as this one may start to turn the tide against employers. If you have questions or concerns regarding your own company’s confidentiality and nondisclosure policies, please speak with a qualified California employment law attorney today.

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* Cathleen Scott is licensed to practice in Florida only.

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