Wall Street Confidential: Does Your Workplace Policy Put You at Risk With the National Labor Relations Board (NLRB)?
Currently before the United States Court of Appeals for the D.C. Circuit is Banner Health System v. National Labor Relations Board, in which Banner Health appeals a ruling by the National Labor Relations Board (the “NLRB”) ruling that the routine practice of requiring workplace investiga-tions to be kept confidential violates Section 7 of the National Labor Relations Act, 29 U.S.C. § 157 (the “NLRA”). 
As any human resources professional can attest, it can be disruptive and costly to undertake an internal investigation under the best circumstances; if Banner Health is upheld, the challenges of undertaking proper investigations will continue to multiply.
Why Should a Broker-Dealer or Employer Care?
It is not uncommon for employers to mistakenly believe that the NLRA applies only to unionized employers and their employees. The NLRA applies to all organizations, however, especially in light of the NLRB’s recent moves to promote labor rights beyond just union activities, sometimes with complete disregard for workplace norms. 
Pursuant to Section 7 of the NLRA, employees have the right to “form, join, or assist” unions, the right to collectively bargain with their employers, and the right to “engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” Section 8(a)(1) prohibits employers from “interfer[ing] with, restrain[ing], or coerc[ing] employees” in connection with asserting their Section 7 rights. Although union membership in the U.S. has been on a decades-long decline (and currently less than 10% of the private-sector workforce is union-ized), the NLRB’s mandate extends to nonunion as well as union shops.
Recent actions brought by the NLRB have involved allegations that workplace policies violate Section 7, regardless of whether the policies were being enforced against employees engaged in union activity. The NLRB’s concerns, therefore, extend to policies that could be construed as placing limits on concerted activities. In June 2012, the NLRB demonstrated its renewed focus on nonunion workers when its new webpage, http://www.nlrb.gov/concerted-activity, came online with an emphasis on educating employees about their rights “to act together to try to improve their pay and working conditions or fix job-related problems, even if they aren’t in a union.” (Emphasis supplied.) 
Of notable concern to the NLRB are workplace policies that mandate confidentiality insofar as they could restrict employees from discussing issues such as workplace conditions, managers, or compensation. Make no mistake, the NLRA gives employees the right to have discussions such as these, and it is a chargeable unfair labor practice (a “ULP”) if an employee is disciplined for doing so.
By extension, the NLRB considers any confidentiality policy that restricts open discussion to be a violation. Similarly, and notwithstanding Supreme Court decisions embracing such procedures, the NLRB also has brought ULP charges based on workplace rules requiring employees to follow an internal reporting process when making employment related complaints.  In fact, the same month that the Board decided Banner, an administrative law judge held that a rule requiring employees to keep the details of arbitration proceedings confidential was unlawful because it “chilled” employees’ rights Section 7 rights. See Advanced Services Inc., Case No. 26-CA-63184 (July 2, 2012). Broker-dealers and all employers should be aware of the NLRB’s renewed interest in non-union workplaces and take time now to review their own handbooks, so as not to subject themselves unnecessarily to charges their policies restrict their employees’ entitlement to partici-pate in concerted activity. 
Case in Point, Banner Health System v. National Labor Relations Board
In Banner Health System, 358 NLRB No. 93 (July 30, 2012), the NLRB held that where an employer asks employees to keep internal investigations confidential (whether they have legal implica-tions or involve simple human resources issues) the practice violates the NLRA.
In Banner Health, the employee confidentiality agreements prohibited the sharing of private employee information; moreover, the employer outsourced HR matters to a consultant, who, as a matter of course, upon receiving a complaint, requested that the complaining employee re-frain from discussing the complaint with his/her co-workers during the pendency of the internal investigation. A Banner Health employee filed a charge with the NLRB that the policies violated the NLRA, but the ALJ disagreed — on grounds that the policy and practice were based upon the “legitimate business reason” of protecting the integrity of internal investigations. (Slip op. at 6.)
Despite this finding, on appeal to the NLRB, the Board reversed the hearing officer’s ruling, instead ruling that the “generalized concern with protecting the integrity of its investigations is in-sufficient to outweigh employees’ Section 7 rights.” (Slip op. at 2). As a result, the Board held that an employer maintaining a policy against employees discussing ongoing investigations violates Section 8(a)(1). In order to avoid such a violation, employers must, on a case-by-case basis, be prepared to enunciate a specific rationale to justify prohibitions by showing they have a legiti-mate business reason in that instance that trumps the employees’ Section 7 rights. Appropriate justifications could include the need to protect witnesses, the likelihood that evidence might be destroyed, the danger that other employees could give false statements, or the need to prevent a cover-up. (Id.) Further, the propriety of any such justifications as applicable during a given in-vestigation may be subject to further scrutiny by a finder of fact.
Banner Health does not establish a total prohibition against requesting confidentiality in investigations, but rather it reinforces that, on a case-by-case basis, “legitimate business justifications” will allow the enforcement of confidentiality agreements during workplace investigations. The Board itemized four such non-exhaustive exceptions that may allow employers to limit employees’ speech. To make use of this carve-out, employers should consider revising confidentiality policies to require case-specific analyses of whether investigations merit confidentiality. Before commencing an investigation, broker-dealers and their human resources personnel should de-termine whether there is a “legitimate business justification” to request that complaining and interviewed employees keep the investigation confidential. Such determinations should be documented in detail, as they may be the only defense to a charge that a confidentiality request violates an employee’s Section 7 rights.
Banner Health Reinforces the Board’s Case-by-Case Analysis
While the Board’s case-by-case requirement may appear to impose an unreasonable and impractical burden on employers to justify the confidentiality of ongoing workplace investigations, it is consistent with a long line of recent decisions that have employed a similar analysis — even when reaching opposite conclusions. Compare, e.g., Charles Schwab & Co., Inc., Case No. 28-CA-19445, slip op. at 19-20 (2004) (confidentiality request had “substantial business justification” of “protecting [witnesses] against retaliation, protect[ing] the integrity of the investigation, and encourag[ing] witnesses to come forward.”) and Caesar’s Palace, 336 NLRB 271, 272 (2001) (rule prohibiting discussion of ongoing drug investigation negatively affected Section 7 rights but was lawful because employer affirmatively demonstrated need for rule to protect safety of witnesses and ensure that neither evidence was destroyed nor testimony manufactured) with Phoenix Transit System, 337 NLRB 510 (2002) (no legitimate interest proven where confidentiality was en-forced more than a year after conclusion of the investigation). As stated in Charles Schwab, “[t]he burden is clearly with an employer to demonstrate that a legitimate and substantial justifi-cation exists for a rule that adversely impacts employee Section 7 rights.” Id. at 19.
More recently, during the pendency of the Banner Health appeal, an ALJ heard Flex Frac Logistics LLC and Silver Eagle Logistics, LLC, Case No. 16-CA-27978 (Jan. 28, 2013). Flex Frac is notable for its holding that even though a confidentiality agreement might be impermissibly broad, “an employer will avoid discipline . . . if it can establish that the employee’s conduct actually inter-fered with the employee’s own work or that of other employees or otherwise actually interfered with the employer’s operations.” Slip op. at 8. After finding that the employer’s confidentiality agreement violated the NLRA because it was “broadly written with sweeping, nonexhaustive categories that encompass nearly any information related to [the employer],” the Board re-manded the case to the ALJ for further factual findings. 358 NLRB No. 127 (Slip op. at 2).
On remand, the employer conceded that it had fired the employee for violating the confidentiality agreement; it introduced evidence, however, that the termination was due to the employee’s disclosure of sensitive customer contract rates and not because of any disclosures concern-ing compensation. Thus, even though the blanket confidentiality agreement violated Section 8(a)(1), the employee was not engaged in protected activity, and the firing was therefore legal. This is an important distinction because many employment contracts have comprehensive and generalized confidentiality clauses; but the NLRB will not necessarily sanction an employer for terminating an employee pursuant to breach of an impermissibly expansive broad confidentiality agreement, provided that the employer can show the action was a result of a legitimate business decision, and was not in response to protected activity by the employee.
Traditionally, broker-dealers and employers concerned with maintaining the integrity of internal investigations into potential workplace misconduct have requested their employees keep the fact of and details about the investigation confidential. As the NLRB continues to reach out to nonunion employees and workplaces, however, broker-dealers and employers should carefully review existing policies — including at-will employment, arbitration, social media, and confidentiality policies — to determine whether they are at risk for ULP charges by disgruntled employees and/or the Board.
Taken together, the decisions discussed here illustrate a sometimes confusing, and generally dis-turbing, trend within the NLRB around issues of workplace confidentiality, several of which are currently working their way through the federal courts of appeal. As the courts work to refine (and, hopefully, bring some uniformity to) this maturing body of law, broker-dealers and employers would be prudent to review their policies that routinely direct or even just request employees not to discuss internal investigations — and to be prepared to articulate that confidentiality is justified by the specific circumstances of a given investigation when enforcing adherence to these policies.
 Still in the initial stages of briefing, the appellate case is currently in abeyance, pending final appeal of the January 25, 2013, Noel Canning decision, in which the DC Circuit Court called into question all NLRB decisions made since the recess appointments of NLRB Members Block and Griffin on January 4, 2012. up
 Moreover, Sections 9 and 10 of the NLRA provide that the NLRB may exercise jurisdiction over unfair labor practices and representation questions “affecting commerce.” Section 2, in turn, broadly defines the term “affecting commerce” to mean “in commerce or having led or tending to lead to a labor dispute burdening or obstructing commerce or the free flow of commerce.” Courts have held that the NLRB’s jurisdiction is co-extensive with Congress’ power under the commerce clause. up
 This focus is also evident in actions by the NLRB’s Acting General Counsel, who recently took the position that at-will provisions in employee handbooks that require employees to waive their right to attempt to change the at-will nature of the relationship violate Section 7 — because such a clause could conceivably preclude a collective bargaining agreement that affects employees’ at-will status. Similarly, the NLRB recently promulgated a rule requiring all (not just unionized) workplaces to display a poster that, among other things, informs employees that they are entitled to form or join a union or engage in other Section 7 activities. The requirement to post this notice is currently suspended while legal challenges to the rule are on appeal. up
 In Burlington Industries, Inc. v. Ellerth, 524 U.S. 742 (1998) and Faragher v. City of Boca Raton, 524 U.S. 775 (1998), the Court held that when defending against hostile work environment claims, an employer may raise an affirmative defense, as long as: (a) the employer exercised reasonable care to prevent, and correct promptly, any sexually harassing behavior; and (b) the plaintiff-employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise. Thus, if there is an appropriate complaint system publicly announced and available, the failure to use that system may be an affirmative defense. up
 Broker-dealers also should be concerned by decisions such as D.R. Horton, 357 NLRB No. 184 (Jan. 3, 2012), in which the NLRB ruled that typical employment agreements with mandatory arbitration clauses and prohibitions on class/collective actions violate the NLRA. Even while that case is on appeal in the Fifth Circuit, the NLRB has proceeded to build on its holding, attacking contracts with class and collective actions waivers, even when employment is not conditioned on acceptance of those provisions. See, e.g., 24 Hour Fitness, Case No. 20-CA-35419 (ALJ applied D.R. Horton and found that class action waiver was unlawful even though employees could opt-out of the arbitration agreement during a window period). up