Social networking sites have become the modern-day water coolers. They provide employees with an unprecedented platform to interact and express their opinions about their coworkers, managers and their jobs – and to do so more freely than ever before. Faced with the now undeniable reality of pervasive social networking by employees, many employers have implemented various policies and practices to attempt to mitigate any negative consequences of disgruntled employees using social media to post disparaging or harmful remarks about work. Recent developments, however, suggest that such policies and practices may lead to unintended, serious legal consequences. In September 2012, the National Labor Relations Board (the “NLRB” or the “Board”), which has become the unlikely lead player in shaping the developing law in the social media realm, issued its first two decisions involving employer social media policies and practices. As a result of these decisions, employers must be careful in designing policies that could impact employees’ social media activities, and approach each social media disciplinary issue thoughtfully, on its facts.

Case No. 1 – Costco Wholesale Corp.’s Social Media Policy Deemed Unlawful

The NLRB’s recent first decision on social media, Costco Wholesale Corp., 358 NLRB No. 106 (Sept. 7, 2012), considered an employer’s policy that prohibited employees from posting damaging statements about the company on social networking sites. Specifically, Costco’s “Electronic Communications and Technology Policy” stated: “Employees should be aware that statements posted electronically (such as online message boards or discussion groups) that damage the Company, defame any individual or damage any person’s reputation, or violate the policies outlined in the Costco Employee Agreement, may be subject to discipline, up to and including termination of employment.”

An administrative law judge upheld the policy, reasoning that an employee would infer that Costco’s purpose in promulgating it was simply to ensure a civil workplace. Accordingly, the judge concluded that employees would not reasonably construe this policy as violating the National Labor Relations Act (the "NLRA"), which gives employees the legal right to discuss their terms and conditions of work.

On appeal, the NLRB disagreed with the administrative law judge, and found that employees would reasonably construe Costco’s policy to prohibit NLRA-protected activity. The Board reasoned that a broad prohibition against any statements that “damage the Company” or “damage any person’s reputation” would include employees’ statements that may protest Costco’s treatment of employees. In line with that position, the NLRB held that employees could interpret Costco’s policy as prohibiting them from engaging in certain protected communications, particularly statements that might criticize Costco. Accordingly, the NLRB held that Costco’s social media policy violated the NLRA.

On Sept. 25, 2012, an NLRB administrative law judge in New York cited the Costco Wholesale Corp. decision in holding that EchoStar Corp.’s social media policy also violates the NLRA. See EchoStar Corp., Case No. 27-CA-066726 (NLRB Sept. 20, 2012). Not unlike Costco’s policy, EchoStar Corp.’s policy prohibited employees from making “disparaging or defamatory comments about EchoStar, its employees, officers, directors, vendors, customers, partners, affiliates, or … their products / services.” The administrative law judge held this policy to impede employees’ rights under the NLRA. The judge further observed that other mitigating employee handbook provisions – including the encouragement that employees use good judgment in their social networking posts, disclaimer that policies are to be applied and interpreted only as consistent with the law and a provision referring employees to human resources with any questions or concerns – could not save the social media policy.

Case No. 2 – Knauz BMW: ‘Courtesy’ Rule Unlawful but Firing over Facebook Incident OK

Shortly after Costco Wholesale Corp., the NLRB issued its second social media decision: Knauz BMW, Case No. 13-CA-046562 (NLRB Sept. 28, 2012). Knauz BMW involved a social media-related employer policy, as well as a termination based on a Facebook posting. While holding against the employer on the policy front, the NLRB interestingly found that the employer’s termination of the employee for his social networking activity was lawful under that case’s particular facts.

Not unlike Costco Wholesale Corp.’s policy in question, Knauz BMW maintained a “courtesy” rule in its employee handbook stating: “Courtesy is the responsibility of every employee. Everyone is expected to be courteous, polite and friendly to our customers, vendors and suppliers, as well as to their fellow employees. No one should be disrespectful or use profanity or any other language which injures the image or reputation of the Dealership.”

The NLRB found this “courtesy” rule to be unlawful on the grounds that employees would reasonably construe it as encompassing employees’ protected communications, including criticism of working conditions. Had the company only encouraged employees to be courteous, the rule would have been deemed lawful, reasoned the NLRB. But since the rule went beyond “the positive aspirational language of the first section” to proscribe messages and communications potentially critical of the company, the Board required the rule’s rescission. It also ordered an employee rights notice posting explaining that the company violated the NLRA and reminding employees of their rights to organize and engage in protected communications about terms and conditions of their employment.

However, the NLRB ruled in favor of Knauz BMW as to the company’s related termination of a car salesman because of his individual Facebook activity. This salesman apparently decided to use his Facebook account to post pictures and comments about a car accident at an adjacent Land Rover dealership. A customer let his 13-year-old son sit in the driver’s seat of a car, and the teenager must have stepped on the gas, driving over the customer’s foot and right into a nearby pond. The salesman posted pictures of this accident on his Facebook page, with the caption: “This is your car: This is your car on drugs.”

Finding this posting unprofessional and inappropriate, Knauz BMW terminated the salesman. The NLRB held that this particular employee’s Facebook posting was “obviously” unprotected by the NLRA, because it did not involve any discussion of employment terms or conditions. Thus, the employee’s termination was justified.

The NLRB, however, cautioned that other postings – including, as an example, that same salesman’s postings and discussions about low-quality food served at the sales/marketing event held at the same time the car accident occurred – would have been inappropriate grounds for termination, as they could well constitute NLRA-protected activity.

The Bottom Line

The NLRB’s first two decisions on social networking should sound a warning bell to employers that the Board is closely eyeing social media-related policies and disciplinary issues. Even employer’s seemingly well-intentioned, appropriate policy statements and disciplinary actions may be found violation of the law.

Employers should have counsel review their relevant policies to ensure their legal compliance appropriateness for their workplace. This legal review, combined with training management on responding to, investigating and handling social media-related workplace issues, will give employers a much less-likely chance of legal trouble when it comes to social networking.