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Federal Appeals Court Upholds NLRB’s Close Scrutiny Of Employer Policies

[February 29, 2016] In recent years, the National Labor Relations Board (“NLRB”) has issued numerous decisions finding employer personnel policies unlawful on the basis that they inhibit employees’ rights to engage in “concerted activities” protected under the National Labor Relations Act (the “Act”). Significantly, the protections given to concerted activities under the Act apply to unionized as well as non-unionized employees.

The NLRB’s critical stance toward such policies was recently bolstered by a decision by the U.S. Court of Appeals for the D.C. Circuit, Hyundai Am. Shipping Agency, Inc. v. NLRB, No. 11-1351 (D.C. Cir. Nov. 6, 2015), in which the court upheld the NLRB’s invalidation of several employee handbook provisions.

In light of the Hyundai decision and the NLRB’s continued close examination of employer policies, it is imperative for employers to ensure that their personnel policies do not improperly proscribe concerted activities protected by the Act.

Legal Background

Under Section 7 of the Act, when employees act collectively for the purpose of bettering the terms and conditions of their employment, such actions generally constitute protected “concerted activity,” for which employees may not be penalized. Significantly, even actions taken by a single employee may be deemed protected concerted activity, if the employee undertakes them with the object of initiating or preparing for group action. Further, the Act’s protection of concerted activities applies equally to unionized and non-unionized employees.

The NLRB has held that a work rule (such as a handbook or other personnel policy) violates Section 8(a)(1) of the Act if it “would reasonably tend to chill employees in the exercise of their Section 7 rights.” The determination as to whether a rule would have such an effect is made through a two-step inquiry:

•  First, if a work rule explicitly restricts protected concerted activities – for instance, by directing employees not to discuss work grievances with one another – the rule will be found unlawful on its face.

•  Second, even if a rule does not explicitly limit protected concerted activities, it nonetheless will be deemed to violate the Act if (1) employees would reasonably construe it as prohibiting protected concerted activity, (2) the rule was promulgated in response to protected concerted activity, or (3) the rule has actually been applied to restrict the exercise of Section 7 rights.

In general, if a rule appears ambiguous as to whether it restricts protected concerted activity, the NLRB is likely to find the rule unlawful.

NLRB’s Hyundai Ruling

In Hyundai, the NLRB held that five employment policies maintained by Hyundai violated Section 8(a)(1) of the Act:

•  Confidentiality of Investigations. Hyundai prohibited employees from discussing workplace matters under investigation by the company. The NLRB found that this rule unlawfully limited employees’ Section 7 right to discuss their terms and conditions of employment with one another.

•  Electronic Communications. Hyundai’s electronic communications policy provided that “employees should only disclose information or messages from [Hyundai’s electronic communications] systems to authorized persons.” The NLRB found that this rule improperly restricted employees from communicating electronically with one another regarding mutual employment concerns.

•  Working Hours. Hyundai policy provided that employees could be disciplined, up to and including discharge, for “[p]erforming activities other than Company work during working hours.” As it has frequently held in the past, the NLRB concluded that the term “working hours” could be interpreted as improperly encompassing break periods, when employees must be permitted to engage in Section 7 activities.

•  Employee Complaints. Hyundai policy advised employees that “[c]omplaining to your fellow employees will not resolve problems” and that “[c]onstructive complaints communicated through the appropriate channels may help improve the workplace for all.” The NLRB found that this rule improperly prohibited, or at least discouraged, employees from speaking to one another concerning terms and conditions of employment.

•  Personnel Files. Finally, Hyundai policy provided that employees could be disciplined, up to and including discharge, for making an “unauthorized disclosure of information from an employee’s personnel file.” The NLRB found that this rule could be interpreted as unlawfully prohibiting employees from disclosing their wages, disciplinary records, performance evaluations, and similar information to co-workers.

Based on its findings, the NLRB ordered Hyundai to cease and desist from maintaining or enforcing any of the above policies and to post a notice in the workplace acknowledging its violation of federal law and affirming its employees’ rights under the Act.

D.C. Circuit’s Decision

On review, the D.C. Circuit held that the NLRB lacked jurisdiction with respect to Hyundai’s personnel file policy, for reasons unrelated to that provision’s compliance with the Act.

However, the court upheld the NLRB’s findings as to three of the four policies that were properly before the agency:

•  Confidentiality of Investigations. As to Hyundai’s confidentiality policy, the D.C. Circuit held that while an employer may be justified in requiring employees not to discuss certain types of ongoing investigations, such as those involving harassment or discrimination, Hyundai’s policy was improperly “broad and undifferentiated,” as it mandated confidentiality in all workplace investigations.

•  Electronic Communications. The D.C. Circuit upheld the NLRB’s finding that Hyundai’s electronic communications policy unlawfully restricted employees from communicating with one another concerning terms and conditions of employment.

•  Working Hours. The D.C. Circuit also agreed that Hyundai’s policy prohibiting employees from engaging in outside activities during “working hours” could be read as improperly prohibiting employees from engaging in concerted activities during break periods. By contrast, the court noted (and the NLRB has long agreed) that an employer may prohibit outside activities during “working time,” since that term is clearly limited to periods when employees are actually expected to be working.

By contrast, the D.C. Circuit rejected the NLRB’s finding that Hyundai’s employee complaint policy violated the Act. The court held that the policy language was not “mandatory []or preclusive,” but merely encouraged employees to communicate complaints to supervisors or Human Resources.

Recommendations For Employers

Now that the D.C. Circuit – an influential federal appeals court – has validated the NLRB’s recent challenges to employer policies, the NLRB’s activities in this sphere may well expand further. Thus, it is critical that employers be aware of the types of policies that may run afoul of the Act, and, in conjunction with experienced labor counsel, review and revise such policies as necessary.

In addition to the policies struck down in the Hyundai case, other types of personnel policies that the NLRB has frequently scrutinized include:

•  Policies that prohibit “disrespectful,” “negative” or “rude” conduct towards management;

•  Policies restricting employees’ communications on social media platforms;

•  Policies restricting employees’ communications with the media, government agencies, or other third parties;

•  Policies prohibiting any non-work-related use of an employer’s name or logo;

•  Policies forbidding employees from taking photographs or making recordings on the employer’s property; and

•  Policies that can be read as prohibiting employees from protesting workplace policies or practices, such as broad policies requiring employees to act at all times in the employer’s “best interests.”

The Firm’s attorneys have extensive experience in counseling employers on handbook and other personnel policies. We would be pleased to assist you in determining whether any of your policies should be revised to avoid a potential challenge by the NLRB.