New Guidance Regarding Employee Handbooks Part Six: Ensuring Conflict of Interest Rules Don’t Inhibit Protected Concerted Activity
This post is the sixth in a series providing guidance on federal rules regarding permissible and impermissible employer handbook policies and rules. See Guidance Regarding Confidentiality Rules Here, Employee Conduct Rules, Rules Related to Company Logos, Copyright, and Trademark, Rules Restricting Photography and Recording and Rules Restricting Employees From Leaving Work. While the recent guidance was issued by the National Labor Relations Board (NLRB), (found here) this guidance is applicable to both unionized and non-unionized employers. The National Labor Relations Act (NLRA) restricts all employers from issuing policies or rules – even if well-intentioned – that inhibit employees from engaging in activities protected by the act, such as discussing wages, criticizing management, publicly communicating about working conditions and discussing unionization.
Conflict of Interest Rules: A Balancing Act
Naturally, all employers would like to prevent their employees from engaging in activities that are in conflict with the employers’ interest. However, there is a great deal of potentially conflicting employee activity that is protected by Section 7 of the NLRA, such as protesting in front of the company, organizing a boycott, or soliciting support for a union during non-work time. Accordingly, if an employer’s conflict-of-interest rules can reasonably be read to prohibit protected concerted activity, the NLRB will view them with great suspicion.
The NLRB provides a couple examples of conflict-of-interest rules that were found to be impermissibly overbroad. These include:
- Policy banning employees from engaging in “any action” that is “not in the best interest of” the employer.
- Policy providing that, “[b]ecause you are now working in one of [employer’s] restaurants, it is important to realize that you have an up close and personal look at our business every day. With this in mind, you should recognize your responsibility to avoid any conflict between your personal interests and those of the Company. A conflict of interest occurs when our personal interests interfere – or appear to interfere – with our ability to make sound business decisions on behalf of [the employer].”
Examples of Permissible Conflict of Interest Rules
The NLRB advises that employers ensure their conflict-of-interest rules do not impinge upon protected Section 7 activity by including specific examples of prohibited behavior. The NLRB explains that when a rule clarifies that it is limited to the employer’s legitimate business interests, employees will understand that it is not banning Section 7 activity.
Some examples of lawful conflict-of-interest rules include:
- A policy that provided two pages of examples of what was considered a conflict of interest, instructing employees to do such things as “avoid outside employment with a[n employer] customer, supplier, or competitor, or having a significant financial interest with one of these entities.”
- Rules prohibiting employees from giving, offering, or promising, “directly or indirectly, anything of value to any representative” of “any person, firm, corporation, or government agency that sells or provides a service to, purchases from, or competes with” the employer.
- Rules in a section of a handbook dealing entirely with business ethics banning employees from “activities, investments or associations that compete with the Company, interferes with one’s judgment concerning the Company’s best interests, or exploits one’s position with the Company for personal gains.”
In sum, employers should take great care to ensure their conflict-of-interest rules provide sufficient clarifying examples and context to indicate that such rules are intended only to protect the employer’s legitimate business interests, and not to inhibit activities protected by Section 7.