• Key labor law developments of 2013 are reviewed here for employers to consider as they look ahead to National Labor Relations Board (NLRB) developments in 2014.
  • Employers should prepare to respond to the NLRB's continued scrutiny of employer policies and practices concerning social media, confidential information and class action waivers, and new NLRB initiatives such as the reissuance of the "quickie election" rules.

After an active 2013, the National Labor Relations Board (NLRB or Board) will continue to advance its agenda in 2014, including resuming its scrutiny of employer policies and practices. This alert highlights the major labor law developments of 2013 – including Board decisions regarding social media and confidentiality provisions – and identifies certain NLRB initiatives for the coming year, including the Board’s recent decision to reintroduce expedited union election rules. We offer practical guidance to help employers navigate potential National Labor Relations Act (NLRA) issues.

(For a review of the Board’s activity in 2012, see a previous Holland & Knight alert, "NLRB's Actions in 2012 Highlight Critical Labor Issues for Nonunion Employers").

Composition of the Board and New General Counsel

In 2013, the NLRB – for the first time since 2004 – became a fully constituted five-member Board, with all members confirmed by the Senate. Three of the five Board members have a background working for or on behalf of unions. The Senate confirmed the Board's new members in August 2013:

  • Kent Hirozawa is the former chief counsel to NLRB Chairman Mark Gaston Pearce. Member Hirozawa began his legal career as a field attorney in the Board’s New York, New York Region (Region 2) and then represented unions and employees for more than 20 years in private practice.
  • Nancy Schiffer most recently was the former associate general counsel at the AFL-CIO. Before her time with the AFL-CIO, Member Schiffer was Deputy General Counsel with the United Auto Workers. She began her career as a field attorney in the Detroit, Michigan Region (Region 7) of the Board before leaving for private practice.
  • Philip A. Miscimarra and Harry I. Johnson III are former labor attorneys who have been in private practice representing management and employers.

Mark Gaston Pearce is the fifth member of the Board and current Chairman. Chairman Pearce was sworn in to a second term on August 23, 2013 (his term expires on August 27, 2018). He is a former Board attorney in the Buffalo, New York Region (Region 3), and was later in private practice representing unions and employees. President Obama nominated him to the Board in 2009, and he began his term in April 2010.

The NLRB's Office of the General Counsel is separate and independent from the five-member Board. Its responsibilities include the prosecution of unfair labor practice cases. In November 2013, Richard F. Griffin, Jr., was sworn in as the NLRB's new general counsel for a four-year term. Before assuming this role, Mr. Griffin served as a Board member between January 2013 and August 2013. He previously served as general counsel for the International Union of Operating Engineers.

The Forthcoming Noel Canning Decision

The Noel Canning case, which addresses whether President Obama had the power to appoint three members to the Board in January 2012 during a Senate "recess," will be decided by the U.S. Supreme Court. The Court’s decision has the potential to create uncertainty as to the validity of perhaps hundreds of Board decisions.

In January 2013, the Court of Appeals for the D.C. Circuit issued its decision in Noel Canning v. NLRB, ruling that President Obama's "recess appointments" to the NLRB were unconstitutional. See 705 F.3d 490 (D.C. Cir. 2013). The case began when the Board issued an adverse decision to Noel Canning Corp., a canning and bottling company, in an unfair labor practices dispute. The company appealed. Arguing that the Board lacked the authority to issue the ruling because it was not comprised of constitutionally appointed board members; the Board was then comprised of three members appointed by the president under the Recess Appointments Clause of the U.S. Constitution.

The Court of Appeals concluded that the three "recess" appointments made by President Obama on January 4, 2012, were "invalid from their inception" because the President exceeded the scope of his authority under the Recess Appointments Clause. The court's holding was supported by two grounds. First, it held that recess appointments may only be made during the recess between each Session of Congress (an "inter-session" recess, which happens only once per year), rather than on a break in Congress that occurs while Congress is still in session (an "intra-session" recess, which occurs rather frequently, such as during holidays). Second, it held that recess appointments can be made to fill only those positions that become vacant during the recess, such that the president cannot make recess appointments to fill preexisting or long-standing vacancies.

The NLRB appealed the decision to the Supreme Court, which heard oral argument on January 13, 2014, and will likely issue a decision before its term ends in June 2014.

If the Supreme Court concludes that the Board did not have authority to act during the relevant period, it is not certain what affect that ruling will have on the Board's decisions issued after January 2012. The full impact of the ruling will depend, in part, on whether the Court provides guidance to the Board concerning how to address decisions and actions that were taken during the period at issue. If the Court's decision invalidates prior Board actions, the Board will need to address not only the decisions it issued, but also the appointment of regional directors and the promulgation of new rules. Depending on the ruling and any guidance offered by the Supreme Court, the Board might assert the position that a Noel Canning-type argument was waived in any case in which it was not raised, thereby clearing the path for those decisions to be re-issued without modification. The Board might also take the position that the decisions are valid under de facto officer doctrine, that is, the decisions were rendered under the color of law and without challenge, and therefore those decisions should stand. Both the waiver issue and the de facto officer doctrine were addressed briefly during oral argument.

The Court previously addressed the validity of Board composition in 2010 in New Process Steel, L.P. v. NLRB, 130 S. Ct. 2635 (2010), a decision that caused the Board to re-issue certain decisions. But that case may not provide significant guidance as to how the Board should proceed if it loses the appeal of Noel Canning. In New Process Steel, the Court concluded that the Board lacked authority to issue decisions without a quorum of at least three members. After the Court's decision, the Board achieved a quorum and simply re-issued the decisions that were previously rendered by a delegated two member panel comprised of one Democrat and one Republican, as the decisions at issue were generally non-controversial and garnered support from the reconstituted Board. Post-Noel Canning, however, there is an entirely new Board. In addition, the scope and substance of the decisions at issue are varied and sometimes controversial, creating different challenges and issues than were not present after New Process Steel.

Social Media Policies and Practices

The NLRB continues to take an active interest in policies and employees' activities concerning social media, protecting employee use of social media as a means of engaging in protected concerted activity. At the heart of the issue is Section 7 of the NLRA, which states in part, "Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection. . . ." Section 8(a)(1) of the NLRA provides that an employer shall not "interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 7." In 2013, the Board struck down employer policies that it concluded had a "chilling effect" on employees' use of social media to complain about the terms and conditions of employment, and ruled against employers who disciplined employees for using social media to complain about their work conditions.

In two cases decided in April 2013, the Board recognized employees' rights to use social media as a means of engaging in protected concerted activity:

  • In Dish Network Corp., the Board ruled that a policy prohibiting employees from "making disparaging or defamatory comments" about the company, its employees, officers, directors, customers, partners or its products and services effectively chilled employees from exercising their Section 7 rights. See 359 NLRB 108 (April 30, 2013). The Board also concluded that a policy prohibiting employees from "engaging in negative electronic discussion" during company time effectively banned union activities during breaks and other non-working hours at the workplace, and that the policy violated Section 7 rights.
  • In Design Technology Group, a group of employees had lodged complaints with their manager about a supervisor in one of the retail stores in which they worked. Later that evening, the employees began a discussion on Facebook complaining about and disparaging the supervisor, and complaining about the company’s lack of response to their complaints. The Facebook post was seen by the manager and the employees were terminated from their employment. The NLRB concluded that the employees were engaged in protected concerted activity and that the complaints on Facebook "were complaints among employees about the conduct of their supervisor as it related to their terms and conditions of employment." See 359 NLRB 96 (April 19, 2013).

The Board, however, has refused to recognize mere "griping and boasting" by individual employees on social media posts as protected concerted activity. In Tasker Healthcare Group, an employee posted a profanity-laced tirade during a private discussion on Facebook with current and former employees directed at her supervisor. In her post, she taunted her employer to "FIRE ME . . . MAKE my day." One of the other participants in the discussion showed the post to her supervisor, which led to the employee's termination of employment. The NLRB's Office of General Counsel, in an advice memorandum, concluded that the post was not protected concerted activity because the employee did not express "shared employee concerns over terms and conditions of employment." Rather, the post "amounted to nothing more than individual griping and boasting about how she was not afraid to say what she wished at work." See Case No. 04-CA-094222 (May 8, 2013).

Although these Board decisions offer some guidance to employers, the NLRB has not drawn clear lines between protected and unprotected social media activities. As a general matter, these decisions highlight the point that social media policies should be narrowly tailored to ensure that the policies do not restrict employees from exercising their Section 7 rights. In addition, employers should carefully consider whether discipline of employees based on their social media activities is consistent with the NLRA.

Confidentiality Provisions and Directives

Employers typically have confidentiality provisions in their employee handbooks or employment agreements that restrict employees from disclosing or discussing information that the employer considers confidential. In 2013, the NLRB continued to take issue with overly broad provisions that would otherwise restrict employees from disclosing "personnel records" because such provisions may restrict employees discussing the terms and conditions of employment.

In Design Technology Group, a retail store maintained policies that prohibited employees from disclosing "personnel information" and "wages and compensation." The NLRB ruled that these prohibitions restricted employees from sharing with other workers information regarding their own wages, hours, and terms and conditions of employment, which effectively chilled their Section 7 rights. See 359 NLRB 96. Similarly, in Quicken Loans, Inc., the Board struck down a provision in an employment agreement that required employees to maintain confidential all proprietary and confidential information, and defined "confidential information" as "personnel lists, rosters, personal information of co-workers, managers, executives and officers; handbooks, personnel files, personnel information such as home phone numbers, cell phone numbers, addresses and email addresses." See 359 NLRB 141 (June 21, 2013). The Board concluded that these restrictions would prohibit employees from discussing "the wages and other benefits that they receive," and "the names, wages, benefits, addresses or telephone numbers of other employees" in violation of employees' Section 7 rights.

And in a case that combines issues of protecting company information and social media use, the NLRB struck down a social media policy prohibiting employees from blogging, entering chat rooms, posting messages on public websites, or otherwise disclosing "company information" that has not already been disclosed as a public record. See DirectTV U.S. DirectTV Holdings, LLC, 359 NLRB 54 (Jan. 25, 2013). Although the social media policy did not define "company information," other policies maintained by DirectTV defined "confidential information" to include "employee records." The NLRB concluded that the policy was unlawful because employees complying with the social media would be prevented from discussing wages and other personnel matters.

The NLRB will continue to strike down policies that prohibit or restrict employees from discussing the terms and conditions of their employment. Employers should ensure that any policies and procedures specify the types of information that must not be disclosed, without crossing the line to restrict – for example, an employee’s right to disclose information about wages, hours and terms of employment.

Rules Restricting Sharing of Information

The NLRB continues to scrutinize workplace policies that restrict employees from sharing information during the course of workplace investigations, finding any such "blanket restrictions" unlawful. The Board has suggested that individualized confidentiality mandates may be appropriate based on the specific facts of the investigation, but such restrictions should be narrowly tailored to meet the company's need for confidentiality and weighed against whether such confidentiality would chill the employee's Section 7 rights.

InThe Boeing Company, an administrative law judge (ALJ) concluded that an employer cannot direct employees involved in workplace investigations to keep the details of those investigations confidential among other employees.Boeing posted two policies, the first "directing" employees not to discuss workplace investigations with each other, and a subsequent notice "recommending" that employees not discuss such investigations with other employees. While acknowledging that blanket confidentiality rules serve some useful purposes, the ALJ followed Board precedent in Banner Health System (July 2012), which prohibited blanket confidentiality rules that have the potential effect of chilling or prohibiting the exercise of protected Section 7 rights. Boeing has appealed the ALJ's decision to the Board. See Case No. 19-CA-089374 (July 26, 2013).

In another case, an ALJ took a harsh view of a "no-gossip" policy instituted by a school because it restricted employees' Section 7 rights. In Laurus Technical Institute, an employee filed a complaint with the EEOC alleging sexual harassment and discrimination, and discussed her EEOC complaint with her co-workers. The school's president gave the employee a verbal warning banning her from further discussion of her complaint with anyone except her supervisor. After the EEOC complaint was filed, the school issued a "no gossip policy" restricting employees from discussing, among other topics, one's own personal life, the personal life of one's co-workers, any negative or disparaging comments or criticisms of another person or persons, and bans the "creating, sharing, or repeating of information that can injury a person's credibility or reputation, a rumor about another person, or a rumor that is overheard or hearsay," unless the employee and the employee's supervisor were present. The ALJ held that the policy, on its face and when read thoroughly, would prohibit virtually all discussion between employees without their supervisors present and, by effect, would prohibit all protected concerted activity. See Case No. 10-CA-093934 (Dec. 11, 2013).

The Board’s decisions continue to present challenges to employers that attempt to balance the need for confidentiality in workplace investigations against employees' Section 7 rights. Although the Board has clearly staked its position with respect to blanket confidentiality provisions, employers likely may require confidentiality on a specific case-by-case basis so long as they can articulate a legitimate business need to maintain confidentiality. Employers are encouraged to review their employment practices to ensure that instructions to maintain confidentiality in investigations are implemented on an as-needed basis after a careful review of the circumstances.

Class Action Waivers

The NLRB has taken the position that a class action waiver in an individual employment agreement is an unlawful restraint on an employee's ability to engage in concerted activity, specifically, an employee's ability to join with other employees to bring a class action complaint. But recent federal court decisions have undercut the Board's position and upheld the validity of such waivers.

The most significant recent development is the Board’s controversial decision in D.R. Horton (2012) has been overturned by the U.S. Court of Appeals for the Fifth Circuit. In this case, the Board concluded that it was a violation of the NLRA for an employer to require employees to sign mandatory arbitration agreements that do not allow for employees to bring class action or collective action claims before an arbitrator or a court. On appeal to the Fifth Circuit (D.R. Horton, No. 12-60031 (5th Cir. Dec. 3, 2013)), the court concluded that the Board’s decision was inconsistent withthe Federal Arbitration Act, which requires courts to enforce arbitration agreements according to their terms, subject to certain limited exceptions which did not apply on those facts. The court relied on the Supreme Court's decision in American Express v. Italian Colors, 133 S. Ct. 2304 (2013), where the Court concluded that class action waivers in arbitration agreements will be strictly enforced under the FAA, even where it is not economically feasible for individual plaintiffs to arbitrate their claims.The Fifth Circuit has recently allowed the NLRB a 45-day window to decide whether it will request reconsideration of the ruling. If the Fifth Circuit’s decision stands upon any request for reconsideration, it will be a significant setback for the Board. (Click here to read Holland & Knight's account of the Supreme Court ruling in American Express v. Italian Colors.)

An ALJ decision in Chesapeake Energy Corporation was a further rejection of the Board's position. In that case, the judge concluded that the Board's prohibition on class action waivers in employee arbitration agreements was not supported by federal law, particularly in light of American Express. The judge noted that the NLRA is silent on class actions, and that the NLRA existed before the federal rule on class action procedures. Therefore, the judge concluded that a class action waiver in an arbitration agreement does not violate the NLRA. See, Case No. 14-CA-100530 (Nov. 8, 2013).

The Board is likely to continue to take the position that class waivers in employment agreements violate the NLRA, and the issue is far from settled. But the Fifth Circuit's decision, which is consistent with decisions in other circuits, provides support for employers that implement properly drafted class waivers.

Quickie Elections

On January 28, 2014, the Board reissued its proposed rule designed to shorten the time between the filing a union election petition and the election. When the Board proposed this same rule in 2011, employers strongly objected on the grounds that it would limit the ability of employers to challenge union petitions before an election and it would give employers less time to state their positions after a union election petition was filed. The Board's efforts were stayed by a 2012D.C. District Court decision in which the court concluded that the rule had been improperly adopted by a two-member Board. With a fully constituted Board, the NLRB is once again moving forward with its plan to shorten the election period. A public hearing on the proposed rules is currently scheduled for April 7, 2014.

Union Paying of Protestors

In November 2013, the NLRB Office of General Counsel released an advice memorandum approving a union's tactic of offering $50 gift cards to employees who engaged in a protest of Walmart, a non-union retailer. In 2012, the union planning a nationwide picketing of Walmart stores on Black Friday, the busy shopping day after Thanksgiving. To encourage Walmart employees to walk off the job, the union offered $50 gift cards to the first 700 Walmart employees who joined the strike. The NLRB ruled that the $50 gift cards were the equivalent of a permissible "strike fund" and did not constitute an unlawful coercion of employees.

Recording Workplace Conversations

Last year, the NLRB upheld an employer's policy prohibiting the recording of conversations in the workplace. In Whole Foods Market, Inc., Whole Foods maintained a policy that prohibits its employees from recording conversations without prior approval. The policy contained an express "purpose" stating that it is intended to eliminate the "chilling effect" on the expression of views when one person is concerned that his or her conversation is being recorded. Whole Foods elicited testimony on the "open door" culture where employees are encouraged to voice their opinions and raise concerns about any topic, whether related to working conditions or any other issue. The prohibition on recording is in furtherance of cultivating and maintaining this culture. Violation of the policy can result in disciplinary action, up to and including termination. Whole Foods further demonstrated that the rule is only applied during working hours, on Whole Foods premises or in the parking lot, and does not apply when an employee is on his or her break. The United Food and Commercial Workers brought a charge alleging that making a recording of a conversation in the workplace was a protected right. The administrative law judge disagreed. Further, the rule was not implemented in response to any union activity. Consequently, the ALJ upheld the rule and dismissed the union's complaint. See Case No. 01-CA-096965 (Oct. 30, 2013).

Notice Posting

The Board's Notice Posting Rule, which would have required employers to post notifications reminding worker's about their right to unionize, has met with resistance by federal courts addressing whether the rule interfered with employers' free speech rights and whether the NLRB had the specific authority to promulgate such rules in the first instance. In a January 6, 2014 press release, the NLRB announced that it would not seek Supreme Court review of the federal court decisions.

NLRB Initiatives

NLRB General Counsel Griffin has highlighted certain initiatives for 2014. They focus on a reexamination of the law concerning whether an employer has an obligation to open its books if it asserts an unwillingness to meet a union's financial demand; seeking Section 10(j) relief in cases where an acquiring company allegedly fails to hire a predecessor company's employees in an attempt to avoid bargaining obligations; and a continued emphasis on reviewing workplace policies that violate Section 7 rights.

Inability-to-Pay Cases. In collective bargaining negotiations, if the employer asserts that it is "unable" to meet the union's financial demand, the union may request an accounting of the company’s financial condition and the employer has an obligation to disclose its financial information to substantiate its position. Instead, to avoid such an obligation, an employer may assert that it is "unwilling" to pay or that acceding to the union's wage demands would render the company "unable to compete" in the industry. For example, in Coupled Products LLC, 359 NLRB 152 (July 10, 2013), the NLRB addressed the distinction between being "unable" and "unwilling" to pay, concluding that the employer was not required to produce certain financial records when the employer asserted that it was "unwilling" to meet the union's demand because it would experience a "competitive disadvantage" by paying higher labor costs than its competitors. But the Board signaled its interest in examining this area of law further, noting that "[i]n an appropriate case, we would consider how the Board has distinguished between 'inability to pay' and 'competitive disadvantage claims' . . . and whether these distinctions best serve the central purpose of the Act: to promote good faith bargaining."  

General Counsel Griffin recently noted the "semantic distinction" between an employer stating that it is unwilling to pay versus a statement that the employer is unable to pay, and he further noted that the Board and courts have recognized that there are no "magic words" required to establish a claim of inability to pay. He has indicated that the Office of the General Counsel will reexamine this distinction and "readdress this substantive area of the law." Given this increased emphasis, employers should anticipate that the Board will review closely an employer's claim of "unwillingness" to pay to assess whether, in fact, the employer's assertion is really a claim of an "inability to pay" that triggers an obligation to open the books.

Section 10(j) Injunctive Relief in Successorship Cases. Section 10(j) of the NLRA authorizes the Board to seek injunctive relief in federal district court. Section 10(j) relief is typically sought when the employer's alleged wrongful act interferes with union organizing and immediate relief is necessary, such as where an employer allegedly retaliated against an employee because of his or her organizing efforts. The NLRB general counsel has indicated an intention to seek Section 10(j) injunctive relief in cases in which an acquiror company is alleged to have refused to hire the predecessor company's employees, in an attempt to avoid bargaining obligations. (As a general matter, an acquiring company has an obligation to bargain with the union of the predecessor company if there is a substantial continuity in the employing enterprise, and one of the factors in this analysis is the number of employees who continue to be employed by the acquiring company). The general counsel has stated that the Board will focus on seeking Section 10(j) injunctive relief in such situations.

Workplace Policies and Practices. As described above, the NLRB has taken a critical view of workplace policies and practices that could be perceived as chilling an employee's Section 7 rights. To that end, its general counsel has indicated that he intends to put a "prosecutorial focus" on workplace policies that he believes are "clearly illegal," with a specific focus on those policies that restrict employees from communicating with each other about wages and compensation.

Conclusion

With a fully constituted Board and new general counsel, the NLRB is poised to aggressively advance its agenda, as demonstrated by its recent decision to reintroduce "quickie election" rules. In addition, the NLRB will continue to scrutinize employer policies and practices and take an expansive view on employees' Section 7 rights. Accordingly, employers should continue to take steps to comply with NLRA by, for example, ensuring that its policies and practices are in accordance with the NLRA and by training key management and supervisory personnel on the practical, day-to-day workplace issues affected by these Board developments.