WBK Industry News - Litigation Developments

NLRB Finds Certain Common Provisions in Mortgage Lender Employment Contract Are Illegal

An administrative law judge (ALJ) with the National Labor Relations Board (NLRB) recently found that several provisions commonly found in mortgage lenders’ employment contracts violated the National Labor Relations Act. 

In this case, the mortgage lender’s standard employment contract included provisions that: 1) restricted disclosure of proprietary and confidential information; 2) governed the use and return of company property, information, and communications; and 3) required that certain disputes between the employer and employee be resolved through arbitration.  Many of those provisions are common in employment contracts between lenders and their employees.  Following a trial and post-hearing briefing, the ALJ found that parts of these provisions violated the National Labor Relations Act (Act) because they had a reasonable tendency to interfere with, restrain, or coerce an employee contemplating engaging in activity protected by the Act.

The ALJ struck part of the lender’s confidentiality provision on the basis that the relevant definitions were overly broad and not narrowly tailored to protect a legitimate or substantial business interest.  For example, the broad definition of “Proprietary and Confidential Information” included “non-public information relating to or regarding the Company’s business, personnel, Customers, operations or affairs.”  The definition would prevent employees from revealing information about nonpublic salary information; disputes between the company and its employees regarding pay and other terms and conditions of employment; employee work stoppages or other protests; yet-to-be reported unfair labor practice allegations; and/or any other sort of information protected by the Act.

The ALJ also struck parts of the lender’s provision dealing with the use and return of company property and information, including provisions stating that company records and equipment are “the sole and exclusive property of the Company” and must “be used solely and exclusively for Company business purposes and for no other purpose.”  This provision was unlawful since it could be interpreted to bar employees from using such documents to report unlawful employment activity.  The AJL struck provisions concerning media and press inquiries and non-disparagement for similar reasons.  

Finally, the AJL found that the agreement’s mandatory arbitration provision violated the Act because it could be interpreted to restrict an employee’s ability to report activity or file a charge with the NLRB.  The AJL found that a general disclaimer that nothing in the agreement should be interpreted to limit an employee’s ability to report violations to government agencies (with an express reference to the NLRB) was not enough to overcome this finding.  First, the savings clause was limited to an employee’s ability to “report good faith suspected violations” but did not also address an employee’s right to file charges or pursue unfair labor practices with the NLRB.  Further, the savings clause was located on page 2 of the contract while the arbitration clause was located on page 14, and neither provision referenced the other.

The lender was ordered to cease enforcement of those provisions, to rescind the unlawful provisions from its employment agreement and notify all past and current employees, and distribute a revised employment agreement that does not contain the unlawful provisions.