Unlawful Policy = Unlawful Termination? The NLRB’s Latest Pronouncement

by BakerHostetler

The NLRB recently issued its decision in Flex Frac Logistics, LLC, Case 16-CA-02978, which the NLRB had remanded to the administrative law judge (“ALJ”) for further analysis after finding that the employer maintained an overly broad confidentiality rule. The specific question remanded to the ALJ was whether the employer’s decision to terminate an employee for violation of an unlawful policy was itself unlawful. The ALJ found that the termination was not unlawful, and in a decision by Members Miscimarra, Hirozawa and Schiffer, the NLRB agreed.

The employer transported materials involved in oil and gas production, sometimes using its own drivers and sometimes subcontracting transport work to other entities. The policy determined to be unlawful prohibited employees from disclosing “plans and ideas, processes and plans; our financial information, including costs, prices; current and future business plans, our computer and software systems and processes; personnel information and documents, and our logos, and art work.”

Kathy Lopez, the employee at issue, worked in accounts payable. She was married to another employee, a driver, who, along with other drivers, complained about rates paid to company drivers.  A key witness for the General Counsel, a former truck driver, testified that Lopez told him that the employer “screwed over” drivers because they were not being paid based on the amount the employer billed its customers for delivery. To back up her claim, Lopez disclosed the differential between what the company charged its customers and what it paid its contract drivers. Several contractors severed their relationships with the employer, who suspected Lopez of having disclosed the employer’s margins to contract drivers.

At the hearing, the employer presented credible testimony that its concern was not the disclosure of this information to an employee, but the fact that Lopez shared this information with the subcontractors. The evidence also showed that employees regularly discussed their wages among themselves, and that the employer had never disciplined or threatened to discipline them for doing so.  Indeed, four months before her discharge, Lopez was involved in “an open and vigorous discussion about wages” with the company’s owner and did not face any repercussions or adverse consequences.

Applying the test the NLRB articulated in Continental Group, 357 NLRB No. 39 (2011), the ALJ determined that while the confidentiality policy was unlawful, Lopez did not engage in protected activity, nor did her discussions with the other employee “implicate the concerns underlying Section 7.” Therefore, her dismissal was lawful. The NLRB adopted the recommended order of the ALJ and also reiterated its support for the test set forth in Continental Group. This means that the test survives another day.

There are two important lessons to be learned from this decision. First, Continental Group clarified a prior NLRB decision in Double Eagle, in which the NLRB declared that disciplining employees for violating unlawful policies is also unlawful. Continental Group looked at the rationale behind the rule to describe its limitations. Specifically, the NLRB said that in the absence of the unlawful rule, concerted activity maintains its protected status. Therefore, if the employee conduct was not protected, e.g., if it interfered with production or employee discipline, then the maintenance of the unlawful rule does not make the discipline unlawful as well. Accordingly, before employers impose discipline, it is important that inquiry focus on not only the policy at issue, but also facts that may show whether the employee(s) engaged in protected activity.

Second, in this case, the employer did a good job of presenting facts to defend itself.  For example, the ALJ credited the testimony of the employer’s witness that Lopez was terminated for sharing confidential information about contracts with customers, not for discussing wages with employees. Given that there was an ongoing dispute over wages, and that Lopez and her husband were involved in the dispute, the employer’s attorneys must have threaded the needle very well at the hearing.

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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