Employees' Duty of Loyalty

Snell & Wilmer

Snell & WilmerIn a recent decision, the National Labor Relations Board (Board) dealt with the issue of the employer's right to require loyalty from its employees. The Board’s decision on this issue is of significant importance to employers.

In Motor City Pawn, 369 NLRB No.132 (July 24, 2020), the Board addressed the legality of many of the employer’s working rules (including confidentiality, non-disclosure, prohibition against bullying, no solicitation, employee use of company email and other communication equipment and requirement to arbitrate disputes). Here, we discuss only the Board’s decision with respect to the employer’s rules prohibiting disparagement of the employer.

The rule prohibiting disparagement of the employer stated, in essence, that employees were prohibited from communicating orally, in writing or by any other manner whatsoever to any customer or third party "any disparaging information of any kind whatsoever," which would cause embarrassment or which would damage or injure the employer’s reputation. The rule stated that this prohibition applied regardless of whether any such communication was true or "founded in facts."

Applying its analysis, announced in Boeing Company, 365 NLRB No.154 (2017), the Board concluded that the rule was lawful.

In its analysis of the employer’s business justification for the rule, the Board cited the Supreme Court decision in NLRB v. Electrical Workers (Jefferson Standard), 346 U.S. 464 (1953), which recognized that employers have a legitimate justification in being able to depend on the loyalty of their employees. In Jefferson Standard, the Court had also acknowledged that “there is no more elemental cause for discharge of an employee than disloyalty."

Balancing, under the Boeing analysis, the adverse impact of the rule on the employees’ rights with the employer’s legitimate justification for the non-disparagement rule, the Board held that the potential adverse impact on protected rights was outweighed by the employer’s legitimate justifications. The rule was therefore lawful.

Employers may consider this recent decision of the Board when drafting and updating their work rules.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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