D.C. Circuit Finds for FCA Defendant Where Liability Premised on Interpretation of Undefined, Ambiguous Term
The National Labor Relations Board (NLRB or Board) may feel emboldened after a recent ruling by the District of Columbia Circuit Court of Appeals, which upheld the Board’s decision that an employer’s policies on investigation confidentiality, electronic communications, and work hours were overly broad, potentially chilling employees’ rights to engage in protected concerted activities. As a result, employers should expect the further onslaught of NLRB attacks on seemingly neutral employment policies to continue, or worse, escalate.
NLRB’s Attack on Handbook Policies
In recent years, the Board has scrutinized many handbook policies, including those of non-union employers. The NLRB attacks those policies that it believes interferes with, or chills, employees’ §7 rights to form labor organizations, bargain collectively, and engage in similar concerted activities. If the employer’s policy or rule would reasonably tend to chill employees in the exercise of their statutory rights, then the employer violates §8(a)(1) of the National Labor Relations Act, committing an unfair labor practice.
Analysis of Whether Policies Violate NLRA
The D.C. Court of Appeals set forth the proper analysis for determining whether an employment policy or work rule can amount to an unfair labor practice under the National Labor Relations Act (NLRA). Hyundai Am. Shipping Agency, Inc. v. NLRB, No. 11-1351 (D.C.Cir. Nov. 6, 2015). First, the Board must determine whether the policy explicitly restricts §7 rights, such as by restricting employees from discussing or forming a union. An explicit restriction on employees’ rights will invalidate the policy, amounting to an unfair labor practice.
In the absence of an explicit restriction on §7 rights, the Board must ask whether the rule:
could be reasonably construed by employees to restrict §7 activity;
was adopted in response to such activity; or
has been used to restrict such activity.
If the answer is “yes” to any of these three questions, then the employer must show an adequate justification for the restrictive language to avoid it constituting an unfair labor practice.
Court Upholds Board Order On Three Policies
The Court reviewed the Board’s order regarding four policies maintained by employer Hyundai America Shipping Agency in its employee handbook, namely its policies on investigation confidentiality, electronic communications, work hours, and complaint provisions. Here is how the Court analyzed whether the Board correctly concluded that each of the policies was restrictive of employees’ §7 rights:
Investigative Confidentiality Rule: Hyundai had an oral rule that prohibited employees from discussing information about matters under investigation. The Court stated that “this blanket confidentiality rule clearly limited employees’ §7 rights to discuss their employment.” The Court then looked at whether Hyundai had offered a legitimate and substantial business justification for the rule that outweighed the adverse effect on its employees’ rights. While acknowledging that there may be a legitimate business justification for mandating confidentiality for particular types of investigations, such as sexual harassment investigations, the Court found that those concerns did not justify a ban on discussion of all investigations. Because the confidentiality rule was overly broad, the Court upheld the Board’s determination that it violated the NLRA.
Electronic Communications Rule: The electronic communications policy in Hyundai’s employee handbook stated that employees should only disclose information or messages from the company’s electronic communications systems to authorized persons. The Court stated that the key to determining the validity of this policy was whether the prohibition was limited to confidential information. Because Hyundai’s rule was not limited to the disclosure of confidential information, a reasonable reader could conclude that it applied to information about the terms and conditions of employment and therefore, it was overly broad and invalid.
Working Hours Rule: Hyundai maintained a handbook policy that allowed for employees to be disciplined, including termination, for “[p]erforming activities other than Company work during working hours.” Here, the key distinction is the use of the phrase “working hours” rather than “working time.” “Working time” excludes break periods so restrictions on union activity during working time is acceptable. On the other hand, “working hours” describes the period from the beginning of a shift to its end, including breaks. Because restrictions on union activity during working hours (sg., including break time) is presumptively invalid, the Court upheld the Board’s conclusion that Hyundai’s rule was invalid.
Complaint Provision: Hyundai’s handbook provided that employees should voice complaints directly to their immediate supervisor or to Human Resources, rather than complaining to fellow employees which would not resolve the problem. Although the Board had ruled this provision invalid, believing it prohibited employees from complaining about the terms or conditions of work among themselves, the Court disagreed. It stated that although the rule urged employees to voice complaints to a supervisor or to Human Resources, it was not mandatory, did not preclude alternative discussions, and did not provide penalties if an employee complained to fellow employees. Therefore, the Court found that the language would not be read to prohibit complaints protected by §7.
Court Rejects NLRB’s Investigation Confidentiality Rule Standard Affirmed in Banner Health
Interestingly, while discussing Hyundai’s investigation confidentiality rule, the Court rejected the ALJ’s opinion that in order to show a legitimate and substantial justification for an investigation confidentiality policy, the employer must determine whether any “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.” The NLRB had reaffirmed that standard in its widely cited Banner Health ruling on confidential investigation policies.
The D.C. Court of Appeals stated that it “need not and do[es] not endorse the ALJ’s novel view” on how employer’s must show a legitimate justification for an investigation confidentiality rule. The Court instead simply held 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.”
Review and Narrow Your Policies
To help avoid NLRB scrutiny, review your employee handbook and other employment policies to determine whether any language could potentially chill employees’ §7 rights. If possible, narrow any restrictions that may infringe on employees’ rights and make certain that your organization can articulate a legitimate and substantial justification for your restrictions. Because these issues are continually evolving, discuss any questionable policy wording with your employment counsel.