Accidental Disclosure of Salary Information Leads to Unfair Labor Practice

Kollman & Saucier
Kollman & Saucier

Section 8(a)(1) of the National Labor Relations Act (the “Act”) makes it an unfair labor practice for an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7” of the Act. Section 7 guarantees employees the right to engage in concerted activities for the purpose of collective bargaining or other mutual aid or protection, which would include employees working together to seek higher wages. The Act applies to most private employers, regardless of whether the employer’s workforce is organized.

Vesta VFO, LLC (“Vesta” or the “Company”) provides wealth management and financial planning services. Andrew Definis and his brother Nicholas Definis both applied for an investment analyst job advertised by Vesta. Both were hired in January 2019 at an initial salary of $50,000, with the Company agreeing to renegotiate their salaries after three months. The Definis brothers’ work consisted of searching the internet and shared files to obtain information that was used to compile reports or dossiers on potential investments, investors, and clients.

After three months of employment, the Company praised the brothers’ work but asked them to postpone the salary review for three more months because the Company was extremely busy. There were no further salary discussions until August 2019, at which point the Company punted again. The Definis brothers were told that everyone was in the same boat with low base wages, but bonuses would make up for it.

In September 2019, Andrew sent an email to management asserting that he and Nicholas were not receiving full credit for their work. He said others integrated their work into documents without giving them credit for locating and analyzing the information. A meeting followed in which the brothers discussed their compensation and work hours with management, but no change in compensation resulted.

In October 2019, Nicholas sent an email to his supervisor saying that he and his brother Andrew are grossly underpaid. Nicholas wrote, “We’ve compiled a wealth of data supporting what we plan to present when negotiating our compensation for this year, next year, and long-term.” Andrew subsequently met with their supervisor and, once again, the subjects of compensation and possible bonuses were discussed, but no changes were made. The Company asked the brothers to hold off until the end of the year.

In November 2019, the Company received a litigation hold notice regarding one of its clients. In response, a large amount of data was collected, and to avoid the cost of outside storage, management decided to save the information on the Company’s SharePoint site.

In December 2019, Andrew accessed the litigation hold information on the SharePoint site to prepare for future work for the client. While doing this, he came across a document titled “loaded payroll,” which he believed was the client’s payroll. Only it turned out to be Vesta’s payroll, which had no reason to be there. The Administrative Law Judge (“ALJ”) who heard the case credited Andrew’s testimony that he did not go looking for Vesta’s payroll and at no point before opening the file did Andrew have reason to believe the file contained Vesta’s payroll.

When he opened the payroll file, Andrew learned that he and his brother Nicholas were the Company’s lowest paid employees, and contrary to the Company’s assertions, others were not working under a structure of low base wages. Andrew shared the information with his brother. Nicholas then sent their supervisor an instant message stating, essentially, that a meeting about his and Andrew’s compensation needed to happen as soon as possible.

A meeting happened the next morning, and the brothers shared that there were documents on the SharePoint site that should not be there, including the payroll file. They said they were disappointed at being misinformed, and that they had objective public information establishing how others in similar jobs were compensated. There was additional discussion about compensation, but the meeting once again ended without resolution.

Without undertaking an investigation into whether the Definis brothers improperly shared or saved any confidential client information, and without interviewing either brother about what happened, the Company decided that Andrew and Nicholas could not be trusted. The Company decided to terminate their employment, stating they would be discharged for cause or could opt to be “laid off” in exchange for two weeks’ pay and signing a release. Although it seems the company offered several formulations of the reason for termination throughout the legal proceedings, the gist was that the brothers were no longer trusted because they went searching for confidential payroll data to use as leverage for a pay increase.

Turning back to the Act, the Definis brothers engaged in protected concerted activity under the Act by discussing and asking to discuss their compensation with management. Disciplining employees for engaging in protected activity usually violates the Act, regardless of the employer’s motive, absent some corresponding or associated act of misconduct that was serious enough to forfeit the protection of the Act.

The issue, therefore, was whether Vesta had an honest belief that the Definis brothers engaged in serious misconduct. The ALJ determined they did not. The ALJ decided that Andrew accidentally happened upon the payroll file, which was not misconduct, and that neither of the Definis brothers violated any Company policies or rules regarding confidentiality, which were intended to prevent the use of confidential information in outside work or business opportunities. Accordingly, the ALJ concluded that the Company did not have a good faith belief that misconduct occurred, and that the termination violated the Act.

The National Labor Relations Board affirmed the ALJ’s decision. Vesta VFO, LLC, 373 NLRB No. 10 (January 10, 2024).

This does not mean that an employer does not have a right to keep certain information confidential. But policies must be carefully crafted, and data vigilantly managed, to make sure confidential information remains confidential. Additionally, employers should take appropriate steps to ensure that, to the extent possible, employment decisions are not based on conjecture, especially when disciplining an employee who has engaged in statutorily protected activity.

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