by:Labor and Employment Practice
Recent cases challenge at-will employment, confidentiality, dispute resolution, and social media policies in nonunion workplaces.
Over the last few years, the National Labor Relations Board (NLRB) has taken more aggressive positions regarding policies applicable to nonunion workplaces. These cases frequently involve allegations that employer policies are unlawfully overbroad and chill speech that is protected under Section 7 of the National Labor Relations Act (NLRA), 29 U.S.C. § 157, even in the absence of any evidence that the policies have been enforced against employees who have engaged in union activity. The NLRB's effort to reach out to nonunion workers expanded in June 2012, when it launched a webpage dedicated to describing "the rights of employees to act together for their mutual aid and protection, even if they are not in a union." Employers should expect that the NLRB will aggressively prosecute charges that employer policies chill or restrict concerted activity by employees at nonunion workplaces.
Section 7 of the NLRA gives employees the right to "form, join, or assist" unions, to bargain collectively with their employers, and to "engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection" (or to refrain from engaging in such activities). Although less than 7% of private sector employees are represented by unions, the NLRA's protections extend to nonunion employees as well as union-represented employees. Further, Section 8(a)(1) of the NLRA makes it unlawful for employers to "interfere with, restrain, or coerce employees" regarding their Section 7 rights. The following cases evidence the NLRB's continuing interest in protecting these Section 7 rights even in nonunion workplaces.
Class or Collective Action Waivers and Confidentiality Provisions in Arbitration Agreements
In its D.R. Horton decision, 357 N.L.R.B. No. 184 (Jan. 3, 2012), the NLRB ruled that an employer violated the NLRA by conditioning employment on agreements that provided that all employment disputes and claims would be resolved by arbitration and that foreclosed any litigation of class or collective claims in court or arbitration.
Numerous courts have refused to follow D.R. Horton, and the D.R. Horton case is under review by the U.S. Court of Appeals for the Fifth Circuit. Nonetheless, the NLRB is seeking to expand the D.R. Horton decision to include arbitration agreements with class or collective action waivers, even if the arbitration agreement is not a condition of employment. In May, an NLRB Regional Office issued a complaint in 24 Hour Fitness, Case No. 20-CA-35419. In that case, the employer had an arbitration policy with a class and collective waiver, but unlike in D.R. Horton, the employee could opt out of participation in the arbitration process. Although the NLRB explicitly took no position in its D.R. Horton decision on whether a voluntary policy violates the NLRA, the complaint in 24 Hour Fitness shows that the NLRB's Acting General Counsel is now taking the position that such an arbitration agreement is unlawful even though an employee's participation is voluntary.
One of the advantages for employers in arbitration is that arbitration is typically significantly more private than court litigation. However, in Advanced Services Inc., Case No. 26-CA-63184 (NLRB Div. of Judges July 2, 2012), an NLRB Administrative Law Judge held that a provision requiring employees to maintain the confidentiality of arbitration proceedings was unlawful because it "chilled" employees' rights to discuss the terms and conditions of their employment.
Employers with arbitration agreements, particularly those with class or collective action waivers, can expect the NLRB to continue to aggressively prosecute charges based on those policies, even where the arbitration agreement is not a condition of employment.
At-Will Employment Disclaimers
The NLRB also recently took the position that an "at will" employment policy violates the NLRA if it is written in a way that suggests that the policy cannot be changed through union organizing and collective bargaining. In American Red Cross Arizona, Case No. 28-CA-23443 (Feb. 1, 2012), an NLRB Administrative Law Judge found unlawful a provision in the employer's handbook that said an employee's "at-will employment relationship cannot be amended, modified or altered in any way." The ALJ found that the clause "premise[d] employment on an employee's agreement not to enter into any contract, to make any efforts, or to engage in conduct that could result in union representation and in a collective-bargaining agreement, which would amend, modify, or alter the at-will relationship," and thus unlawfully restricted employees' Section 7 rights.
Hyatt Hotels Corporation also recently settled a case involving at-will policy language and an acknowledgement form stating that "no oral or written statements or representation regarding your employment can alter your at-will status, except for a written agreement signed by you and either our Executive Vice President/Chief Operating Officer or  President." Although the NLRB's Acting General Counsel has not publicly explained his prosecution theory in that case, it appears that the policy was challenged because it provides an exception only for a written statement signed by an individual employee, and therefore does not account for the possibility that the policy could be modified by a collective bargaining agreement signed by a union. As a result of these two cases, employers should review the at-will language in their employee handbooks and other documents to determine whether they are subject to an NLRA challenge.
Confidentiality of Investigations
Most recently, the NLRB in Banner Health System, 358 N.L.R.B. No. 93 (July 30, 2012), held that asking employees to keep internal human resources or legal investigations confidential violates the NLRA. In this case, the employer's human resources consultant routinely asked employees making a workplace complaint not to discuss the matter with coworkers while the investigation was ongoing.
The Administrative Law Judge found that the prohibition against discussing matters under investigation was justified by the employer's concern with protecting the integrity of its investigations. The NLRB, however, in a 2-1 decision, reversed the Administrative Law Judge and held that the "generalized concern with protecting the integrity of its investigations is insufficient to outweigh employees' Section 7 rights." The NLRB held that an employer could not have a "blanket" confidentiality rule. Instead, the employer must justify confidentiality on a case-by-case basis, taking into account such factors as whether witnesses need protection, whether evidence is in danger of being destroyed, whether testimony is in danger of being fabricated, or whether some other reason warrants confidentiality.
The Banner Health decision raises new concerns for employers. It is difficult to maintain the integrity of any internal investigation if the employer cannot rely on the investigation being kept confidential while in progress. Banner Health now requires employers to defend a confidentiality requirement and demonstrate why it is needed in certain cases or categories of cases.
The NLRB continues to be active in issues regarding social media. In Hyatt Hotels Corporation, Case No. 28-CA-61114, the employer had a corporate-wide code of business conduct and ethics policy requiring employees to report "any known or suspected violations of this Code, including any violations of the laws, rules, regulations, or policies that apply to Hyatt." The NLRB's Acting General Counsel issued a complaint, alleging that the policy was overbroad because of its requirement that employees report violations to the employer, rather than choosing to report elsewhere, such as in social media.
On May 30, the NLRB's Acting General Counsel issued the third in a series of reports on cases involving social media policies. Unlike the previous two reports, which summarized specific cases in which social media came into play, this third report analyzed seven employer social media policies. The Acting General Counsel gave a number of examples of policy provisions he considered unlawful and also included a policy he considered to be lawful. Employers should review their social media policies to determine if they are in compliance with the NLRB's approved language.
As the NLRB continues to reach out to nonunion employees and workplaces, employers—both unionized and nonunionized—should carefully review existing policies, including at-will employment, arbitration, social media, and confidentiality policies, to determine whether they are at risk for challenge under the NLRA.
Join Morgan Lewis lawyers Jonathan Fritts and Ross Friedman to discuss the NLRB's expanding mandate and solutions to the issues raised by the NLRB's recent actions at our webinar—"The NLRB Wants to Review Your Employee Handbook—Should You Be Worried?"—on September 19, 2012. Register for the webinar here.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis attorneys:
Lisa Stephanian Burton
A. John Harper II
Clifford D. "Seth" Sethness
Joseph C. Ragaglia
. See our previous LawFlashes discussing criticism of the D.R. Horton case, "Courts Reject NLRB's Ruling That Arbitration Agreements Violate NLRA" (Apr. 2, 2012), available here, and "California Court Enforces Waivers of Class and PAGA Representative Claims" (June 11, 2012), available here.
. Our June 1, 2012, LawFlash, "Acting NLRB GC Issues Updated Report Concerning Social Media Cases," which discusses the acting general counsel's report and includes a link to the report itself, can be accessed here.