In our July 2012 newsletter, we highlighted several instances in which the National Labor Relations Board (the “NLRB”) ruled against employers with non-unionized workforces for violations of the National Labor Relations Act (the “NLRA”), specifically Section 7 of the NLRA permitting employees to “engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection.” Below we highlight notable developments in NLRB proceedings and court actions that may assist employers in understanding the scope and impact of the NLRB’s new enforcement efforts. While it is prudent for employers to keep abreast of developments in the NLRB, we note that there are virtually no Court decisions addressing the NLRB’s recent expansive interpretation of the NLRA and the few Board decisions have been decided by one vote margins, which renders them susceptible to reversal depending on subsequent appointments to the Board.  

The NLRB’s First Decision Concerning Social Media Policies

Overruling the decision of an Administrative Law Judge (“ALJ”), the NLRB issued its first decision concerning an employer’s efforts to control the social media activities of tis employees in Costco Wholesale Corp. and United Food and Commercial Workers Union, Local 371, 34-CA-012421, 358 NLRB No. 106 (Sept. 7, 2012). Costco’s employee handbook stated that employees who electronically posted statements “that damage the Company, defame any individual or damage any person’s reputation or violate the policies outlined in the Costco Employment Agreement” would be subject to discipline. The NLRB found that this rule clearly encompassed communications regarding the treatment of Costco’s employees and thus ran afoul of the employees’ Section 7 rights.

In the only aspect of the decision that may be positive for employers, the NLRB explained that “there is nothing in the rule that even arguably suggests that protected communications are excluded from the broad parameters of the rule,” which may mean that an appropriate savings clause could have avoided liability. Note, however, that the NLRB’s Acting General Counsel’s stated position rejects the use of savings clauses. Moreover, it is unclear how specific a savings clause would need to be to be effective. Less than two weeks after the NLRB issued its decision in Costco Wholesale, an ALJ sitting in Colorado struck down a social media policy that appeared in the employer’s handbook with a general clause stating that any policy contained in the handbook should “be applied and interpreted so as to make the policy lawful.” EchoStar Techs., L.L.C. and Gioipna M. Leigh, NLRBALJ, 27-CA 066726 (Sept. 20, 2012).

Exercise Caution When Asking an Employee Not to Discuss an Ongoing Investigation

Two recent NLRB decisions addressed employer policies requiring that ongoing investigations be kept confidential. The NLRB ruled 2-1 in Banner Health System and James A. Navarro, 28-CA-023438, 358 NLRB No. 93 (July 30, 2012), that the employer violated the NLRA because of its regular practice of asking employees making a complaint not to discuss their complaint with co-workers during an ongoing internal investigation. The NLRB explained that such a prohibition must be justified by a legitimate business reason that outweighs an employee’s Section 7 rights to engage in concerted activity under the NLRA.

The decision overturned an ALJ ruling that such a prohibition was justified by a concern for the integrity of investigations and instead held that such a concern was insufficient to trump Section 7 rights. The NLRB found that the employer has the burden to “determine whether in any given investigation witnesses needed protection, evidence was in danger of being destroyed, testimony was in danger of being fabricated, or there was a need to prevent a cover up.” The employer’s blanket approach violated these requirements.  

In contrast, an ALJ in Atlanta found that an employer articulated the legitimate business interest necessary to justify directing employees to refrain from discussing pending investigations. In Advanced Services, Inc. and Tabita Sheppard Howard and Princess Ballard, NLRBALJ, 26-CA-63184, 7105 (July 2, 2012), an employer argued that it occasionally conducts “integrity investigations” “involving such matters as employee wrongdoing relative to the sharing of confidential proprietary business information, violence in the workplace, or instances where a member of management is implicated in broadly sharing employee discipline.” During these types of investigations, employees who possess relevant information are directed not to speak with other employees about the investigation while it is ongoing. The ALJ found that the employer’s instructions to misconduct was a serious matter for both the employer and its employees. Thus, the ALJ ruled that it was reasonable for the employer to admonish the employee not to discuss information shared during the employer’s investigation.

Employers should be aware that instructions to maintain confidentiality regarding an ongoing investigation may be construed by the NLRB as infringing on Section 7 rights. Cautious employers will consider on a case-by-case basis whether confidentiality is appropriate and the scope of such confidentiality, as the NLRB has made it clear that it will reject blanket restrictions.

Office Gossip Regarding Discipline and Compensation

The Banner Health System and Advanced Services decisions discussed above both place strict limits on the ability of an employer to prevent office gossip regarding co-workers’ terms of employment. In Banner Health System, the employer’s form confidentiality agreement prohibited employees from discussing private information regarding other employees, such as their salary or disciplinary record, unless such information was shared by the employee at issue. The NLRB upheld an ALJ’s ruling that this provision violated the NLRA, which in turn relied upon precedent holding that requiring an employee to obtain permission from another employee in order to speak about that employee’s compensation would improperly impair the exercise of Section 7 rights. Similarly, in Advanced Services, an ALJ ruled that a manager’s direction to an employee that she should refrain from discussing with others the contents of her performance improvement plan and associated discipline improperly restricted the employee’s Section 7 rights.

Consequently, blanket policies prohibiting employees from discussing the terms and conditions of their employment or their performance evaluations are likely to run afoul of the NLRB’s position on these issues.

Next Up — The NLRB’s New Focus on At-Will Employment Statements

Offer letters and handbooks often contain a general statement regarding the at-will nature of the employment relationship and indicate that this arrangement may not be modified except in a writing signed by the employee and an executive of the employer. The American Red Cross Arizona and Hyatt Hotels both were recently targeted by the NLRB for using such language. But soon after these two developments, the NLRB’s Office of the General Counsel issued two advice memoranda providing employers with guidance in ensuring the lawfulness of their employment at-will statements.

An ALJ in Arizona determined that the Red Cross’s handbook acknowledgment language stating that the at-will arrangement “cannot be amended, modified or altered in any way” violated an employee’s Section 7 rights, finding that an employee could believe that, by agreeing to this language, he had waived any right to engage in collective bargaining or other activities protected under the NLRA. American Red Cross Arizona Blood Service Region and Lois Hampton, 28-CA-23443 (Feb. 1, 2012). The ALJ thus found that “there is no doubt” that an employee could reasonably interpret such language as prohibiting Section 7 activity.

The targeting of Hyatt Hotels for using language permitting modification of the at-will employment arrangement only in a signed writing was even more alarming for employers, as similar statements are commonly used by employers in handbooks, employment agreements, and other documents in order to continually reinforce the at-will nature of the relationship (the Red Cross had gone farther by providing that the at-will relationship could never be modified). Hyatt entered into a settlement resolving this complaint, which thus provided little guidance for other employers.

But on October 31, 2012, the NLRB’s Office of General Counsel issued two advice memoranda, allowing employers to breathe a sigh of relief. First, it advised that Rocha Transportation’s at-will statement, providing that an employee’s at-will status could only be modified by the president of the company, did not violate the NLRA. Rocha Transportation, Case No. 32-CA-086799 (Oct. 31, 2012). The memorandum explained that the provision “does not require employees to refrain from seeking to change their at-will status or agree that their at-will status cannot be changed in any way.” It noted that because the employer’s president was specifically permitted to enter into agreements concerning the alteration of an employee’s at-will status, such a statement necessarily allowed the president to enter into a collective bargaining agreement.

Second, and a closer call, was the Office of General Counsel’s determination that the at‑will statement used by Mimi’s Café was permissible. Mimi’s Café, Case No. 28-CA-084365 (Oct. 31, 2012). The handbook provided that “[n]o representative of the Company has authority to enter into any agreement contrary to the foregoing ‘employment at will’ relationship.” The Office of General Counsel repeated verbatim what it wrote in the Rocha Transportation memorandum that the provision did not prohibit employees from seeking a change in their at-will employment status. It distinguished this matter from American Red Cross by explaining that the at-will employment statement in that determination prohibited any modification of the at-will agreement.

Interestingly, the Mimi’s Café memorandum concludes by noting that the parties in American Red Cross settled before the ALJ’s decision was reviewed by the NLRB and, therefore, the law remains unsettled. The Office of General Counsel specifically directed its Regions to submit all cases concerning the restriction of modification of at-will employment status to the Division of Advice.

The NLRB and Courts Disagree on the Enforceability of Arbitration Agreements

The NLRB continues to pursue enforcement of its decision in D.R. Horton, Inc. and Michael Cuda, Case 12-CA-25764, 357 NLRB No. 184 (Jan. 3, 2012), that employers cannot require employees to sign arbitration agreements waiving their rights to bring joint, class, or collective actions. Thus, for example, the ALJ in Advanced Services found that a class action waiver clause violated the NLRA because it allowed collective actions only if all parties (i.e., including the employer) agreed. Courts, however, have not shown deference to the NLRB’s position.

A variety of courts have indicated disagreement with the NLRB’s views. By example, on July 18, 2012 a California appellate court ruled that it was not bound by the NLRB’s decision in D.R. Horton and upheld an arbitration agreement that did not permit collective actions. Nelsen v. Legacy Partners Residential, Inc., 207 Cal. App. 4th 1115 (Cal. App. 1st Dist. 2012). The court reasoned that only two members of the NLRB subscribed to the D.R. Horton holding and that “[t]he subject matter of the decision — the interplay of class action litigation, the [Federal Arbitration Act (the “FAA”)], and section 7 of the NLRA — falls well outside the [NLRB’s] core expertise in collective bargaining and unfair labor practices.” The court further opined that the NLRB’s decision reflected a “novel” interpretation of the FAA and Section 7 of the NLRA.

Confidentiality of Arbitration Proceedings

The ALJ in Advanced Services also found that an employer violated the NLRA because its arbitration agreement required that all such proceedings be kept confidential, including the contents of the arbitration hearing and record, documents exchanged in discovery or otherwise used, and all communications between the parties in connection with the resolution of the employee’s claims. While the clause did not explicitly restrict Section 7 activity, the ALJ evaluated whether the clause: (1) would cause employees to reasonably construe the language as prohibiting Section 7 activity; (2) was drafted to address Section 7 activities; or (3) the rule has been applied to restrict the exercise of Section 7 rights. The ALJ found that the confidentiality clause was reasonably interpreted to prohibit Section 7 rights, as it prohibited employees from disclosing information that might lead to group action. Because the employer could not offer a legitimate and substantial business justification that would outweigh the infringement on employee rights, the ALJ ruled that the confidentiality requirement violated the NLRA.

Once again, it is unclear whether this decision reflects a new NLRB initiative or will be accepted by the courts. In any event, it is expected that many employers will continue to assess the need for confidentiality protection on a caseby- case basis and enter into protective orders in arbitrations where appropriate.

What’s an Employer to Do?

Over the past year, the NLRB has staked out new positions that are contrary to common business practices of employers both large and small. Unsurprisingly, employers are not welcoming this activism with open arms, and challenges to these new policies are working their way through the court system. Until the full impact of these decisions becomes known, employers should take care before terminating any employee based upon his or her comments or discussions, whether in person, electronic, or otherwise, to assess the risk of potential claims under the NLRA. In addition, employers should continue to monitor developments to assess whether modifications to their policies and practices may become necessary.