Background

In a recent blog post, we discussed the heavy restrictions the National Labor Relations Board (the “NLRB” or the “Board”) has placed on company policies that direct employees who participate in internal investigations to refrain from discussing the subject matter of the investigation with their coworkers. These restrictions extend to both unionized and non-union employers. In the Board’s view, such policies interfere with employees’ rights under Section 7 of the National Labor Relations Act to discuss terms and conditions of employment with each other and to engage in concerted activity for mutual aid and protection.  As a result, the Board has held that employee confidentiality may be required only if the employer has “objectively reasonable grounds for believing that the integrity of the investigation will be compromised without confidentiality.”  Banner Estrella Medical Center, 362 NLRB No. 137 (June 26, 2015), at 4.  The Board has identified certain narrow circumstances which would qualify as “objectively reasonable grounds,” though cases finding those circumstances to be present have been exceedingly rare:  where “witnesses need protection, evidence is in danger of being destroyed, testimony is in danger of being fabricated, and there is a need to prevent a cover up.”  Id.

Left unclear was whether those are the only grounds that could justify a confidentiality requirement.  The confusion stems from the fact that earlier Board decisions had noted the possibility of “other comparably serious threats to the integrity of an employer investigation” that would justify a confidentiality rule. However, more recent Board decisions have omitted this caveat and could be read as restricting the scope of “objectively reasonable grounds” to those noted by the NLRB in Banner Estrella.

A related point of confusion was whether and to what extent, the Board would deem an employer’s obligations under other statutes to be a valid justification for a confidentiality rule.  One obvious example would be an employer’s duty under federal and state EEO laws to investigate internal employee complaints of discrimination and harassment. For many reasons (including the need to preserve the integrity of the investigation and to protect complaining employees from retaliation), employers have traditionally required participating employees to refrain from discussing the matter under investigation.  Here too, the Board seemed to modify its position without expressly acknowledging it.  Although in Banner Estrella the  NLRB specifically noted that the need to fulfill a “statutory mandate” could be a potential justification for requiring confidentiality, in subsequent Board decisions there is no reference to that approach in cases rejecting employer attempts to defend their confidentiality rules as necessary to comply with EEO statutes.  

The upshot?  The commonplace employer practice/policy of directing employees to maintain confidentiality regarding workplace investigations may very well be a path toward an unfair labor practice charge under the NLRA.  

The D.C. Circuit Offers Some Relief

Employers struggling with this conundrum have been given some hope by a recent decision by the U.S. Court of Appeals for the District of Columbia Circuit.  In Hyundai Am. Shipping Agency, Inc. v. NLRB, No. 11-1351, 2015 U.S. App. LEXIS 19388 (D.C. Cir. Nov. 6, 2015), the employer appealed from an ALJ ruling, affirmed by the Board, which struck down a blanket confidentiality rule that Hyundai had applied to all internal investigations.  The D.C. Circuit agreed with the Board that such a blanket rule clearly limited employees’ Section 7 rights, and therefore could be upheld only if the employer could present a legitimate and substantial business justification that outweighed the rule’s adverse effect on employee interests.

Hyundai argued that such a business justification was provided to it by federal and state anti-discrimination laws and guidelines.  In that regard, the court specifically cited the EEOC’s guidelines which suggest that information and records regarding sexual harassment investigations should be kept confidential.  The court acknowledged that EEO compliance could be a valid justification for a confidentiality requirement:

We agree that the obligation to comply with such guidelines may often constitute a legitimate business justification for requiring confidentiality in the context of a particular investigation or particular types of investigations.

Hyundai, 2015 U.S. App. LEXIS 19388, at *7-8. In this case, however, the court agreed with the Board that Hyundai’s rule was overly broad as it was not limited to EEO investigations but rather it was applied to all investigations.  

Significantly, the D.C. Circuit also appeared to signal its disapproval of the NLRB attempt to limit confidentiality to those situations of severe threats to witnesses or to evidence:

In enforcing the Board’s order, we need not and do not endorse the ALJ’s novel view  that in order to demonstrate a legitimate and substantial justification for confidentiality, an employer must “determine whether in any give [sic] investigation witnesses need protection, evidence is in danger of being destroyed, testimony is in danger of being fabricated, and there is a need to prevent a cover up.”  Instead, we simply hold that Hyundai’s confidentiality rule was so broad and undifferentiated that the Board reasonably concluded that Hyundai did not present a legitimate business justification for it.

Hyundai, 2015 U.S. App. LEXIS 19388, at *8 (internal citations omitted). Although, as our previous post showed, the ALJ’s view arguably was not all that “novel” in light of other Board and ALJ decisions, the bottom line is that the court rejected the idea of such a limitation on the possible grounds on which an employer may seek to justify its confidentiality rule.

What Does This Mean For Employers?

The D.C. Circuit’s decision in Hyundai certainly gives employers a reason to breathe a sigh of relief, but first a note about jurisdiction and the precedential value of the case.  A party aggrieved by an NLRB decision can seek judicial review in either (i) the Circuit Court for the jurisdiction in which the case arose (or where the party resides or does business), or (ii) the D.C. Circuit.  The Board, under its “non-acquiescence” policy, does not treat Circuit Court decisions as binding precedent for future cases (in part because different circuits may rule differently on the same issue).  That policy, however, has less practical effect with respect to decisions of the D.C. Circuit because of the court’s nationwide jurisdiction over appeals from Board decisions.  Thus, even if the Board were to decline to adopt Hyundai in future cases involving internal investigation confidentiality, an employer suffering an adverse ruling could seek recourse at the D.C. Circuit and invoke Hyundai as controlling.  As a result, employers across the nation can look to Hyundai for guidance.

In practical terms, the D.C. Circuit recognized the quandary felt by many employers:  how are they supposed to comply with the seemingly conflicting dictates of the NLRB and other federal and state statutes, such as EEO and whistleblower statutes, which impose a duty on employers to conduct thorough and reliable internal investigations which, in turn, typically necessitate confidentiality?  The Hyundai court indicated (albeit, in dicta) that such statutory mandates may, indeed, provide the requisite justification under the NLRA for a confidentiality rule.  

Additionally, the Hyundai court took issue with the Board’s negative view of applying a confidentiality rule to all investigations of “a particular type.”  In Banner Estrella, the Board had held that an employer must make a case-by-case determination – and offer a case-by-case justification – for imposing a confidentiality rule.  In Hyundai, the D.C. Circuit implicitly rejected this holding, stating that complying with EEOC investigation guidelines may indeed justify a confidentiality rule “in the context of . . . particular types of investigations.”
 
While this seems to open the door to carefully crafted investigation policies that include confidentiality rules for specific types of investigations, it must be emphasized that the Board has yet to react to the D.C. Circuit’s views in any decision and therefore it is critical for employers to proceed with caution.   Where confidentiality is required, it should be based on a clearly articulated statutory or regulatory directive (such as the EEOC’s investigation guidelines cited by the court) which should be specifically identified in the policy itself.  Employers may also need to develop protocols for their internal investigators to use in making a preliminary determination as to the type or category of investigation presented by each new complaint/issue and to document the basis for that determination.  This may require developing guidelines for differentiating among various types of internal investigations as to when confidentiality is appropriately justified.

We will continue to monitor developments in this area.  Employers are advised to consult with counsel before adopting or modifying their internal investigation confidentiality policies.