Runaway Train Stopped in its Tracks?

Employment Law Newsletter

In a decision that may ultimately negate any post January 2012 decisions issued by the National Labor Relations Board (NLRB), the D.C. Circuit Court of Appeals in January 2013 struck down as unconstitutional three controversial “recess” appointments to the NLRB by President Obama. The court held that the presidential power to make appointments when Congress is in “recess” (and therefore unavailable to vote on the nominations) does not apply to a generic break in Congressional proceedings for several days. The President’s nominations were made in January 2012 when the Senate was not in recess but was meeting in sessions every three days and thus were unconstitutional from their inception.

Although the issue is far from settled – the U.S. Supreme Court has decided to hear the recess appointments issue – the questionable status of the currently constituted Board may be fatal to a slew of decisions issued under the recess appointees. At issue in many of these rulings was whether employer policies and practices infringed upon employees’ rights under Section 7 of the National Labor Relations Act (NLRA) to engage in “concerted activity,” including discussion of the terms and conditions of employment with coworkers. Although the NLRA was historically implicated in unionized workplaces, its protections apply to non-unionized workplaces as well, and non-unionized employers are increasingly targeted by the NLRB for violations of the Act. These decisions have created a firestorm among employers, who view the NLRB’s recent pronouncements as pro-union attacks upon employers’ abilities to reasonably manage their workplaces. Below is a summary of some of the Board’s more controversial rulings:

Company rules precluding employees from disparaging the employer, disclosing confidential information or communicating with third parties continue to be struck down by the NLRB. In , the Board reiterated that its determination of whether employee conduct policies unlawfully restrict Section 7 rights turns on whether 1) employees would reasonably construe the language as prohibiting protected Section 7 activity; 2) the rule was promulgated in response to union activity; or 3) the rule was applied to restrict the free exercise of Section 7 rights. Applying this test, the Board concluded that a provision of Costco’s employee handbook requiring employees to use “appropriate business decorum” when communicating with others was simply an effort to promote a civil workplace and could not reasonably be construed to prohibit protected communications. Conversely, the handbook’s rule prohibiting messages that “damage the Company, defame any individual or damage any person’s reputation” could reasonably be interpreted by employees as prohibiting protected communication critical of the employer or its terms and conditions of employment, and thus could “reasonably tend to chill employees” in their exercise of Section 7 rights.

A mere three weeks later in , the Board considered an employee handbook rule stating “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.” Applying the three factors discuss above, the Board found that the broad prohibition against “disrespectful” behaviors and “language which injures the image or reputation of the dealership” could be construed by employees to encompass protected Section 7 activity, such as employee complaints about management and working conditions to co-workers, supervisors or other third parties in an effort to secure support for changing these workplace conditions.

Finally, on the day that the D.C. Circuit struck down the President’s recess appointments, the Board audaciously issued its decision in , once again striking down several employer policies. The first attack was on the employer’s policy instructing employees not to contact the media about company matters. Whereas the rule did not carve out unprotected communications, the Board concluded that the restriction could be construed as prohibiting employees’ communications with the media about labor disputes in violation of Section 7. The second policy to fall required employees to refer all workplace inquiries by law enforcement to management for further handling. The Board found the policy overly broad because employees could reasonably conclude that investigations into NLRA violations by NLRB agents would be included within the “law enforcement” encounters to be referred to management. Lastly, the Board stuck down the company’s confidentiality rule instructing employees to never discuss “details about your job, company business, or work projects with anyone outside the Company” and to never “give out information” about the company’s customers. The Board reasoned that these restrictions were a violation of Section 7 rights because they could be reasonably be interpreted by employees as barring employee discussions about wages, discipline, performance ratings and other terms of conditions of employment.

Blanket policy requiring employers to keep workplace complaints confidential unlawfully interfered with employee’s Section 7 rights. In (July 2012) the NLRB ruled that the employer’s routine policy to warn employees involved in HR investigations to refrain from discussing the investigation with other employees violated Section 7 rights. The Board reasoned that such blanket confidentiality policies preclude employees from discussing problems in the workplace amongst themselves. Although many HR professionals agree that such confidentiality directives are warranted by best practices, the NLRB announced that before imposing confidentiality requirements, an employer must conduct a case-by-case analysis to determine if confidentiality was necessary to 1) protect witnesses; 2) prevent the destruction of evidence; 3) prevent fabricated testimony; or 4) prevent a cover-up. If one or more of these factors were present, the employer would have a “legitimate business justification for the confidentiality expectation” that trumped employees’ Section 7 rights to discuss the investigation.

Employers may be required to surrender confidential statements secured during workplace investigations to unions. Traditionally, confidentiality of witness statements secured by employers has been a key component of investigations into workplace harassment and other misconduct. Along the lines of the decision, in (Dec. 2012), the NLRB overruled 34 years of Board precedent that categorically exempted written witness statements from an employer’s production obligations to a union seeking information under the NLRA. Rather, the Board adopted a “flexible approach” that “adequately protects the interest of the employer and witnesses, while preserving the general right of requesting unions to obtain relevant information.” Under the new ruling, an employer refusing to produce a witness statement must prove “that a legitimate and substantial confidentiality interest exists” that outweighs the union’s need for the information. As a result, unions are encouraged to request all statements related to workplace investigations, while employers face the prospect of ineffective investigations because witnesses to misconduct will likely be discouraged from being candid for fear that their statements will be disclosed.

Employees’ Facebook venting about a co-worker’s criticism of their job performance was protected concerted activity. In (Dec. 2012), the NLRB considered whether the termination of five employees for their off-duty Facebook posts complaining about a co-worker’s habit of criticizing them for not doing enough work was a violation of Section 7 rights. The target of the employees’ comments complained that she was being harassed by her co-workers, who were then terminated for violating the employer’s “zero tolerance” policy against bullying and harassment in the workplace. The employees filed charges with the NLRB claiming that their off-duty posts constituted protected concerted activity under Section 7. The NLRB agreed, notwithstanding the fact that the posts were about a co-worker and not a member of management, and the posts by the employees did not appear to indicate that these co-workers intended to do anything about the situation. The Board reasoned that merely expressing a similar viewpoint or discussing terms and conditions of employment with co-workers may be protected because a mutual aid object can be “implicitly manifested” from the surrounding circumstances. The lone dissenting member of the Board noted that the employees’ comments appeared to be more like “venting” rather than a “call for action” protected by the NLRA.

Clearly, this decision places employers in the no-win situation of risking NLRB action for enforcing workplace conduct policies, or alternatively, taking no action and risking negligent retention, workplace bullying and emotional distress claims from the victim of the workplace behaviors. This latest decision addressing Facebook firings serves as an additional caution signal to employers contemplating discipline for violations of workplace conduct rules in employee’s social networking activities.

Non-union employer’s mandatory arbitration agreements interfere with employees’ Section 7 rights. Bucking the trend of recent U.S. Supreme Court decisions heavily favoring arbitration as a means to resolve employment disputes, the NLRB continues to invalidate arbitration agreements that, in the eyes of the Board, interfere with employees’ Section 7 rights. In (Jan. 2012) , the employer required employees to execute an arbitration agreement mandating arbitration of all employment related disputes, and waiving class action claims in any forum. The NLRB ruled that an agreement precluding collective actions by employees unlawfully interfered with employees’ rights to engage in “concerted action for mutual protection.” Whereas this decision appears to violate several recent decisions of the Supreme Court permitting arbitration and class action waivers of employment disputes, the decision is currently subject to a hotly contested appeal before the 5th Circuit Court of Appeals.

Undaunted by the fact that most federal courts have rejected the NLRB’s rationale in in favor of the Supreme Court’s sanction of mandatory arbitration agreements, the NLRB once again kyboshed an agreement mandating arbitration of employment disputes. (Dec. 2012) involved a challenge to the termination of several employees who refused to execute the employer’s alternative dispute policy requiring arbitration of all employment related disputes, but containing a disclaimer permitting employees to file charges with a “government agency” (which arguably included the NLRB). The Board found that the policy on the whole was ambiguous because it did not include an express carve-out reference to the NLRB or actions under the NLRA, and thus could reasonably be interpreted by employees as limiting access to the Board for violations of the NLRA.

Pending further review of the NLRB’s aversion to enforcing agreements to arbitrate employment disputes in non-union workplaces, employers should consider revising their alternative dispute agreements to include a statement that employees are free to pursue claims before the NLRB to vindicate alleged violations of Section 7 rights.

The rulings discussed above are consistent with the Board’s prior attacks on commonplace provisions in codes of conduct, social networking policies, confidentiality requirements and other rules found in employee handbooks and policies. Although a seemingly reasonable solution to these dilemmas would be the inclusion of language indicating that the rule would not be applied to concerted conduct protected by Section 7, such disclaimers were deemed insufficient to cure the policy’s infringement on protected activity in guidance issued by the NLRB’s Acting General Counsel earlier this year.

The NLRB has indicated that it has no intention of staying its hand while the D.C. Circuit’s recess appointment ruling is challenged before the U.S. Supreme Court. Although the Board’s rulings may be nullified if the Supreme Court agrees that the recess appointments were unconstitutional, the Administration has resubmitted the nominations of two of the recess appointees, urging that they be subject to a simple up or down vote before the Senate. Ultimately, the take away from the NLRB’s recent activity is that employer policies restricting employee conduct or communications must be very narrowly tailored to survive NLRB scrutiny and its recent interpretations of employee rights under the NLRA. Employers should consult with employment counsel to assess whether their handbooks and policies should be revised to avoid being in the cross-hairs of the current or future NLRB.