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.”

Conclusion

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.