Over the past few years, the National Labor Relations Board (the “NLRB”) has expanded its traditional focus on unionized workplaces (or employees’ attempts to unionize), promulgating or extending legal principles in a manner specifically calculated to reach employers that have non- unionized workforces. When targeting non-unionized employers, the NLRB focuses on Section 7 of the National Labor Relations Act (the “NLRA”), which sets forth the right of employees to “engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection.” Below, we summarize notable recent developments in NLRB proceedings and court actions that may assist employers in understanding the scope of the NLRB’s latest enforcement efforts.
Constitutionality of Recess Appointments
Before the end of its current Term, the Supreme Court will rule on the constitutionality of President Obama’s January 2012 “recess appointments,” with the potential to invalidate years of cases decided by the Board when it was comprised in part of members appointed during that recess and implicating recess appointments across the federal government. When President Obama made three appointments to the NLRB, he controversially used the recess appointments clause of the Constitution to complete the five-member Board. The clause permits the President to “fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.”
The Supreme Court challenge to the recess appointments derives from the NLRB’s ruling against Noel Canning in February 2012. Two of the recess appointees were on the three-member panel and voted against Noel Canning. The D.C. Circuit reversed the decision, finding that these two panelists were improperly added to the Board because the Senate was not in recess at the time Presidential Obama appointed them. In doing so, the court found that because there were only two properly appointed Board members, the NLRB had no power to issue any rulings at that time.
The Court heard oral argument in National Labor Relations Board v. Noel Canning on January 13, 2014, and the Justices’ questions focused on the meaning of “recess” and how a recess is triggered. If the NLRB appointments are found invalid, the Board will likely be forced to issue new opinions on more than 100 cases currently now on appeal by parties challenging the Board’s decisions on the basis of the recess appointments.
The Rejection of its Seminal Decision Banning Class Waivers Won’t Stop the NLRB
While a variety of courts have disagreed with the NLRB’s decision in D.R. Horton, Inc. and Michael Cuda, Case 12-CA-25764 (Jan. 3, 2012) (“D.R. Horton”), which ruled that employers cannot require employees to sign arbitration agreements waiving their rights to bring joint, class, or collective actions, the Fifth Circuit put a critical nail in the coffin, finding in the appeal from that decision that D.R. Horton’s class waiver arbitration agreement did not violate the NLRA. The NLRB apparently is unfazed, and maintains that its decision in D.R. Horton is still binding authority.
On December 3, 2013, the Fifth Circuit ruled that the NLRB was incorrect in its blanket rejection of class action arbitration waivers, upending the NLRB’s holding. D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013). Specifically, the court dismissed the NLRB’s argument that employees have a substantive right to class action procedures when pursuing NLRA claims and ruled that the NLRA does not override the FAA. On separate grounds unrelated to the NLRA, the Fifth Circuit ruled that the arbitration provision was invalid.
Even though the Fifth Circuit eviscerated the rationale of D.R. Horton — and the Second, Eighth, Ninth, and Eleventh Circuits have ruled similarly — the NLRB has refused to follow suit. In a recent decision, an administrative law judge (“ALJ”) wrote “I am bound by D.R. Horton until either the Board or the Supreme Court overturns it.” Domino’s Pizza LLC and Fast Food Workers Committee, Case 29-CA-103180 (Mar. 27, 2014). The NLRB clearly has no intention of overturning D.R. Horton, so employers will have to wait for the Supreme Court to rule that class action waivers in employment arbitration agreements must be enforced — or continue to appeal adverse rulings by the NLRB to the federal courts.
The NLRB’s Latest Frontier: Dress Codes
In a decision adopted by the Board, an ALJ found that an employer’s policy that banned clothing containing language or images “derogatory to the company” was an unlawful restriction and could reasonably be construed to prohibit protected activity. The employee involved in Alma Products Co. and District 2, Case 07-CA-089537 (Aug. 14, 2013), wore a t-shirt with the images of a time clock, a ball and chain, and the word “slave” printed on the back. Almost twenty years earlier, employees had worn such shirts during a labor dispute, and when the employee learned in 2012 that contract negotiations were going poorly, he wore the shirt to work. The employer sent the employee home without pay when he refused to remove the shirt.
The ALJ rejected as “disingenuous” the employer’s argument that the shirt was racially offensive and unreasonably interfered with the employer’s public image, finding that the word “slave” did not reference race. The ALJ rejected as a red herring the employer’s argument that permitting an employee to wear such a shirt could result in liability for racial harassment because he found that the shirt could not “single-handedly create an environment so pervasively offensive as to begin to approach the threshold for actionable racial harassment.” Of course, responsible employers are attentive to all conduct that could contribute to a racially insensitive environment, whether or not the conduct could “single-handedly” result in liability.
Limiting Conduct to “Fair Criticism” Violates Section 7
Employers have yet another reason to review their codes of conduct. In William Beaumont Hospital and Jeri Antilla, Case 07-CA-093885 (Jan. 30, 2014), an ALJ found that a policy prohibiting comments or gestures “that exceed the bounds of fair criticism” and behavior “counter to promoting teamwork,” was unlawful. The ALJ wrote that such phrases violate the NLRA because they “may reasonably chill the exercise of Section 7 rights.”
Secrets Don’t Make Friends: Questioning Internal Confidentiality Policies
Employers often enact policies governing the internal and external sharing of confidential or proprietary information, but the NLRB may now have such internal policies in its crosshairs. Earlier this year, the Board issued a decision holding that the prohibition of the “dissemination of confidential information within [the Company], such as personal or financial information” is unlawful. MCPc, Inc. and Jason Galanter, Case 06-CA-063690 (Feb. 6, 2014). The Board focused on its belief that such a policy would lead reasonable employees to believe that they could not discuss wages or other terms and conditions of employment with their co-workers.
The Board found that the use of such a policy to justify terminating an employee who discussed his workload and the compensation of an executive violated the NLRA. But Board member and Republican Phillip A. Miscimarra noted that he did not agree with the Board’s handling of policies that do not explicitly prohibit Section 7 activity and are not used by the employer to discipline protected activity. Mr. Miscimarra asserted that such policies should not be deemed unlawful, indicating that the Board should focus on the employer’s actions. He “advocates a re-examination of this standard in an appropriate future case.”
The current Board appears intent on battlling every conceivable interpretation of an employer policy or action that could be interpreted as infringing, or even merely chilling, the exercise of Section 7 rights. While the longevity of this approach is in doubt — the NLRB has a history of reversing course when its membership changes, and the federal courts have rejected many of the Board’s efforts to extend its authority — employers are well-advised to consider reviewing their policies to determine whether modifications are appropriate to limit the risk of becoming a target of a Board investigation or proceeding.