Employers Law Update - Employers Beware: NLRB Challenges Established HR Practices

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The National Labor Relations Board (NLRB) has issued a number of recent opinions questioning and, in some instances, invalidating common employer practices and policies on the grounds of protecting employee rights under Section 7 of the National Labor Relations Act (NLRA).  The impact of these decisions on handbook disclaimers and investigative procedures is addressed below.

Language In Handbook Disclaimers May Constitute Unfair Labor Practice

Most employers include contract disclaimers or acknowledgements confirming the at-will nature of the employment relationship in their employee handbooks and other documents. These provisions are generally intended to clarify or emphasize that the relationship may be terminated at any time, for any reason, by either party. Employers often rely on these disclaimers and acknowledgments as protection from claims by employees that language within the handbook or other document creates a binding contract. Indeed, some states, including South Carolina, even have legislation specifying the circumstances under which such contract claims can be disclaimed effectively (http://www.nexsenpruet.com/assets/attachments/106.pdf).

Recently however, the NLRB has called these at-will disclaimers into question. Specifically, the NLRB has begun to challenge language within these documents that states the at-will relationship cannot be changed at all or only under certain circumstances, such as written consent by the employer. The NLRB’s position is that this language could interfere with employee rights under Section 7 of the NLRA to engage in concerted activities, including for the purposes of improving working conditions, union representation and collective bargaining. 

 In NLRB v. American Red Cross, 2012 WL 311334 (NLRB 2012)the NLRB challenged the employer’s handbook acknowledgement, which stated that the at-will relationship could not be “amended, modified or altered in any way,” on the theory that it would hamper employee attempts to engage in collective action because it could result in modification of the employment relationship. (http://hr.cch.com/eld/RedCrossALJ.pdf). Ultimately, an administrative law judge agreed and concluded that the employer had engaged in an unfair labor practice. The case was settled before the full NLRB had an opportunity to review the decision.

 Similarly, shortly after the American Red Cross decision, the NLRB filed an unfair labor practice complaint against Hyatt Hotels, alleging the company’s at-will disclaimer violated the NLRA where employees acknowledged that their at-will status could not be altered unless in writing by an executive.  NLRB v. Hyatt Hotel Corp., 28 CA-061114 (February 29, 2012).  The NLRB’s position was that the handbook provisions constituted employer interference, restraint and coercion with respect to employees’ exercise of their right to engage in concerted activity, should they want to change their employment status.  This case settled before the matter was presented for hearing, with Hyatt agreeing to modify its at-will employment policies on a nationwide basis.  (http://hr.cch.com/eld/Hyattsettlement.pdf).

While the NLRB’s focus does not appear to be on policy language that generally outlines the at-will employment relationship, its position remains to be seen.

Confidentiality Requirements for Investigations May Constitute Unfair Labor Practice

Most employers also have established procedures for conducting internal investigations of employee complaints that include requirements for employees to maintain the confidentiality of the investigation.  The NLRB recently held, however, that an employer cannot have a blanket rule prohibiting employees from discussing ongoing investigations of employee misconduct. 

In Banner Health System d/b/a Banner Estrella Medical Center, 358 N.L.R.B. No. 93 (2012), the NLRB’s general counsel challenged the medical center’s instructions to an employee making a complaint that he or she not discuss the matter with co-workers during the investigation.  The NLRB rejected the argument that confidentiality was necessary to protect the integrity of the investigation, finding the generalized concern was outweighed by employees’ rights under Section 7 of the NLRA to engage in “concerted activities” for their mutual aid and protection.  

The NLRB concluded that an employer must identify a specific need for confidentiality in every investigation, such as to protect witnesses or to avoid spoliation of evidence or fabrication of testimony, before instructing employees to maintain confidentiality.  Otherwise, according to the NLRB, an employer’s blanket confidentiality requirement is a violation of the NLRA.

It is important to note, however, that the NLRB did not determine that all confidentiality requirements are invalid. Instead, the decision only precludes employers from maintaining a blanket confidentiality rule generally applicable to all internal investigations.  Indeed, the NLRB previously has recognized the need to maintain confidentiality during certain workplace investigations, such as employee drug use or theft. See Caesar's Palace, 336 N.L.R.B. 271, 272 (2001); Metropolitan Edison Co., 330 N.L.R.B. 107, 107-08 (1999).  The decision in Banner Health System does not overrule these prior decisions. 

Under these circumstances, specifically tailored confidentiality instructions are still appropriate for internal investigations where the employer has and specifies a legitimate business justification.  Moreover, the NLRA does not protect rights of supervisory employees, and the decision in Banner Health System does not otherwise preclude employers from a general requirement that those employees maintain confidentiality during an internal workplace investigation. 

Recommendations for Employers

These recent decisions are consistent with other pro-union opinions issued by the NLRB over the course of the past year and will continue to present challenges for employers, as discussed in Nexsen Pruet’s October 2011 Employment and Labor Law Newsletter. (http://www.nexsenpruet.com/publications-601.html).  In the current political climate, we expect similar controversial rulings by the NLRB.  The courts and Congress could negate these rulings.  At a minimum, employers should monitor the expansion of Section 7 rights and the impact on the workplace.  Some employers may re-evaluate or revise certain workplace policies, including handbook disclaimers and investigative procedures, depending on their circumstances.