Costco Wholesale Corp., 358 NLRB No. 106 (2012).
Over the past year the NLRB has issued multiple reports on social media policies, many of which we covered here on the blog. It wasn’t until recently, however, that the NLRB issued a decision regarding these policies. In doing so, the NLRB ruled that a provision in Costco’s employee handbook violated Section 8(a)(1) of the National Labor Relations Act (“NLRA”).
In Costco Wholesale Corp., 358 NLRB No. 106 (2012), several rules from Costco Wholesale Corporation’s employee handbook were challenged. For the most part, the policies prohibited employees from posting or distributing materials on company property, discussing other employees’ private matters, and sharing or transmitting employees’ sensitive financial and other personal information. Moreover, Costco also maintained a rule which prohibited employees from electronically posting statements that “damage the Company . . . or damage any person’s reputation.” Any employee who violated the rules could be subject to discipline, including termination. Believing that the policies violated the Costco employees’ Section 8 rights, the United Food and Commercial Workers union challenged the rules. Ultimately, the NLRB affirmed an administrative law judge’s (“ALJ”) finding that a majority of the policies did not violate the employee’s Section 8 rights. The NLRB, however, did not agree with the ALJ’s finding that the following rule did not violate the NLRA:
Any communication transmitted, stored or displayed electronically must comply with the policies outlined in the Costco Employee Agreement. Employees should be aware that statements posted electronically (such as [to] online message boards or discussion groups) that damage the Company, defame any individual or damage any person’s reputation, or violate the policies outlined in the Costco Employee Agreement, may be subject to discipline, up to and including termination of employment.
In general, Section 7 defines the rights of employees under the NLRA, including the right to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.” “Concerted activities” occur when two or more employees take action for their mutual aid or protection regarding terms and conditions of employment, such as bringing group complaints to the employer’s attention, trying to induce group action, or seeking to prepare for group action. An employer violates Section 8(a)(1) when it “interfere[s] with, restrain[s], or coerce[s] employees in the exercise of the rights guaranteed in section 7.”
As noted by the NLRB, when determining whether a provision of an employer’s policy violates Section 8(a)(1), the appropriate inquiry is whether the rule would “reasonably tend to chill employees in the exercise of their Section 7 rights.” If a rule explicitly restricts Section 7 rights, it will be deemed unlawful as violating the NLRA. If it does not, “the violation is dependent upon a showing of one of the following: (1) employees would reasonably construe the language to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of Section 7 rights.”
Contrary to the ALJ’s finding that that employees of Costco would not reasonably construe this rule as regulating Section 7 conduct, the NLRB found that because that provision places a “broad prohibition against making statements that ‘damage the Company, defame any individual or damage any person’s reputation,’” the rule clearly “encompasses concerted communications protesting the [employer]’s treatment of its employees.” The NLRB also noted that although the policy does not explicitly prohibit Section 7 conduct, the Costco employees could “reasonably conclude that the rule requires them to refrain from engaging in certain protected communications (i.e., those that are critical of [the employer] or its agents).” Therefore, because the policy had a “reasonable tendency to inhibit employees’ protected activity” it violates Section 8(a)(1) and must be rescinded or modified as to not offend the employee’s rights under the NLRA.
A special thanks to Sean Gajewski, a law clerk at Cullen and Dykman LLP, for helping with this post.
 See “Employee Rights,” National Labor Relations Board, http://www.nlrb.gov/rights-we-protect/employee-rights (last visited October 3, 2012).
 Lafayette Park Hotel, 326 NLRB 824, 825 (1998), enfd. 203 F.3d 52 (D.C. Cir. 1999).