In a decision that will affect both unionized and nonunionized private-sector employers, the National Labor Relations Board (the "Board") has held that the National Labor Relations Act ("NLRA") prohibits employers from discharging an employee to prevent the employee from discussing concerns about wages with other employees. The Board's decision in Parexel International LLC, issued on January 28, 2011, marks a significant expansion of employee protections under the NLRA that private-sector employers need to consider when making certain termination decisions.

Factual Background in Parexel International LLC

The employer in Parexel employed a number of South Africans in both management and nonmanagement positions at its Baltimore, Maryland facility. Theresa Neuschafer, a nonsupervisory employee at that facility who is not South African, engaged in a conversation with one of her South African colleagues, John Van der Merwe, who had recently returned to the employer after briefly leaving the company. Neuschafer asked Van der Merwe if he had been given a raise upon his return to employment, and Van der Merwe responded untruthfully that he had received a raise and a promotion upon returning to the company. Neuschafer then asked if Van der Merwe’s wife, who had recently left the company, would also return with a raise. Van der Merwe again responded untruthfully, saying, “Absolutely, we’re clever people and Liz Jones [a fellow South African and a member of the management team] is going to look after [the South Africans in the employer's work force]."

Angered by the conversation, Neuschafer complained to her immediate supervisor, stating that the entire unit should simply quit so that they could also receive raises. The supervisor reported this conversation to higher management, which resulted in a meeting between Neuschafer, Liz Jones, and a human resources representative. During the meeting, Jones told Neuschafer that management was concerned about a rumor Neuschafer had started that South African employees were being favored and would “take over.” Neuschafer reiterated her concern that the employer was paying South Africans a higher wage. Jones asked Neuschafer if she had discussed the matter with other employees. Neuschafer honestly reported that she had not had any further conversations. Six days later, the employer fired her. The Board found that the employer discharged Neuschafer in part to prevent her from discussing her wage concerns with other employees.

The Board’s Decision in Parexel International LLC

Section 7 of the NLRA gives nonsupervisory employees of most private-sector employers the right to engage in concerted activity for "mutual aid and protection." In layman's terms, this means that nonsupervisory employees in the private sector generally have the statutory right to act together with the goal of affecting wages, hours, and other terms and conditions of employment. This right applies regardless of whether there is a union in the picture and regardless of whether the employees' ultimate goal involves union representation. Employees who exercise their right to act together are ordinarily protected by the NLRA, and employers that interfere with this right can be found to have committed an unfair labor practice. Indeed, the Board has held in the past that prohibiting employees from discussing wages constitutes unlawful interference with their Section 7 rights because discussion of wages is often a first step towards collective action protected by the NLRA.

The factual situation in Parexel presented a novel issue for the Board because the employee who was terminated had not yet discussed her concerns about wages with other nonsupervisory employees and therefore had not engaged in any concerted action protected by the NLRA. The employer in Parexel took what the Board characterized as preemptive action to get the employee out of the work force before she could discuss her wage concerns with other employees. Although discharging an employee for engaging in protected activity has long been recognized as an unfair labor practice because it chills and therefore interferes with the exercise of Section 7 rights, the Board went one step further in Parexel and concluded that a preemptive discharge to prevent employees from engaging in protected concerted activity constitutes unlawful interference with employees' Section 7 rights under the NLRA, even though no employees have yet engaged in protected concerted activity.

The Board in Parexel observed that if the maintenance of a rule barring communication about wages violates the NLRA, so, too, must the discharge of an employee to prevent her from engaging in that very conduct. When an employee is discharged to prevent conversation about the terms and conditions of employment, the Board reasoned, she and those with whom she would have communicated are denied their right to discuss those subjects and to take any concerted action that may stem from such discussions. The Board added that the key to determining whether a violation has occurred in this situation lies in the employer’s intent to suppress protected activity. “If an employer acts to prevent concerted protected activity - to ‘nip it in the bud’ - that action interferes with and restrains the exercise of Section 7 rights and is unlawful without more.”

Practical Implications

The NLRA applies to most employers in the private sector, and the Board’s decision in Parexel is a reminder to covered employers that nonsupervisory employees have a statutory right to discuss the terms and conditions of their employment, including salary comparisons, the belief that other employees enjoy special treatment, and the feeling that they are being mistreated by management. Employers should review existing policies and procedures to ensure that they do not prohibit protected employee communication. In addition, when conducting internal investigations, employers should generally refrain from inquiring about conversations between employees relating to wages, hours, and other terms and conditions of employment. Employers should carefully consider their employment decisions that will adversely affect an employee who has recently engaged in concerted activity protected by the NLRA or, in light of Parexel, an employee who may reasonably be expected to engage in such activity in the near future. Those decisions can be challenged as unfair labor practices aimed at interfering with employees' NLRA rights, and the employers may have to prove that the decisions were made for legitimate business reasons. Awareness of employee rights under the NLRA can help reduce the risk of liability under that law for both unionized and union-free employers.