Overbroad Confidentiality Rule and Other Handbook Policies Unlawful: NLRB | Practical Law

Overbroad Confidentiality Rule and Other Handbook Policies Unlawful: NLRB | Practical Law

In Lily Transportation Corporation, the National Labor Relations Board (NLRB) found that a confidentiality rule and two other work rules maintained by an employer in its employee handbook were unlawful under Section 8(a)(1) of the National Labor Relations Act (NLRA), and that the employer's issuance of a new handbook without the three rules before a hearing over unfair labor practice (ULP) charges did not effectively repudiate the employer's violation.  Although the employer had already rescinded the rules, the NLRB ordered the employer to post a notice to employees informing them of the circumstances surrounding the distribution of the new handbook. 

Overbroad Confidentiality Rule and Other Handbook Policies Unlawful: NLRB

Practical Law Legal Update 5-607-8085 (Approx. 5 pages)

Overbroad Confidentiality Rule and Other Handbook Policies Unlawful: NLRB

by Practical Law Labor & Employment
Published on 14 Apr 2015 • USA (National/Federal)
In Lily Transportation Corporation, the National Labor Relations Board (NLRB) found that a confidentiality rule and two other work rules maintained by an employer in its employee handbook were unlawful under Section 8(a)(1) of the National Labor Relations Act (NLRA), and that the employer's issuance of a new handbook without the three rules before a hearing over unfair labor practice (ULP) charges did not effectively repudiate the employer's violation. Although the employer had already rescinded the rules, the NLRB ordered the employer to post a notice to employees informing them of the circumstances surrounding the distribution of the new handbook.
On March 30, 2015, in Lily Transportation Corporation, a majority of a three-member delegation of the panel (Board) heading the NLRB's judicial functions held that a confidentiality rule maintained by an employer in its employee handbook was unlawful under Section 8(a)(1) of the NLRA. The Board unanimously held two other rules unlawful, and that the employer's issuance of a new handbook without the three rules before a hearing over unfair labor practice (ULP) charges did not effectively repudiate the employer's violation. Although the employer had already rescinded the rules, the Board ordered the employer to post a notice to employees informing them of the circumstances surrounding the distribution of the new handbook. (362 N.L.R.B slip op. 54 (Mar. 30, 2015).)

Background

In September 2013, ULP charges were brought against Lily based in part on three work rules in its employee handbook. The work rules addressed confidentiality, posting of information on the internet by employees, and dress code.
In December 2013, less than two weeks before a scheduled hearing, Lily issued a new employee handbook with these three rules deleted. Lily did not explain to employees why it had issued the new handbook. On the hearing date, the parties stipulated to the basic facts, and without a hearing, an administrative law judge (ALJ) ruled that each of the three rules violated Section 8(a)(1) of the NLRA, and that the employer's rescission of the policies did not constitute effective repudiation of the ULPs. Lily filed exceptions to the ALJ's ruling.

Outcome

A majority of the Board (Members Hirozawa and McFerran) held that the confidentiality rule was unlawfully overbroad and violated Section 8(a)(1). The Board unanimously (including Member Miscimarra) held that:
  • The employer's work rules involving internet posting and workplace dress violated Section 8(a)(1).
  • Lily did not effectively repudiate the unlawful workplace rules by issuing a new employee handbook that removed the offending policies.
  • The proper remedy for the violation (since the offending policies had already been removed) was for Lily to post a notice to employees explaining the circumstances surrounding the distribution of the new employee handbook, including why the three work rules were removed.

Confidentiality Rule

Lily maintained the following rule within a section of its employee handbook titled "Inappropriate Conduct" that could lead to discipline, including termination of employment:
"Disclosure of confidential information, including Company customer information and employee information maintained in confidential personnel files."
A majority of the Board (Members Hirozawa and McFerran) found this rule unlawful because:
  • Reasonable employees would construe it as prohibiting them from disclosing information about employees' wages and other employment terms and conditions (Cintas Corp., 344 N.L.R.B. 943 (2005)).
  • The rule was included in a section that addressed both major and seemingly less significant violations (for example, attendance), making it ambiguous as to whether the confidentiality rule was intended to prohibit discussion of wages and employment terms and conditions (and the burden of any ambiguities must be borne by the employer) (Hyundai Am. Shipping Agency, Inc., 357 N.L.R.B. slip op. 80 (Aug. 26, 2011)).
  • The dissent's reliance on Mediaone of Greater Florida, Inc. was misplaced, because in that case the prohibition on disclosing "employee information, including organizational charts and databases" was part of a section titled "Proprietary Information" (340 N.L.R.B. 277 (2003)). In that context, Mediaone involved a restriction on disclosing proprietary business information and intellectual property, not a restriction on disclosing information relating to employment terms and conditions.
Member Miscimarra dissented on the lawfulness of the confidentiality rule, finding that the rule should be found lawful. Member Miscimarra noted that:
  • The "reasonably construed" standard adopted by the Board in Lutheran Heritage Village-Livonia for assessing confidentiality rules that do not expressly restrict protected activity is not proper and should be reexamined in an appropriate future case (343 N.L.R.B. 646, 646 (2004)).
  • Even applying Lutheran Heritage Village-Livonia, the rule was lawful because the "Inappropriate Conduct" section of Lily's handbook banned serious misconduct such as workplace violence, drug use and theft. Therefore, the confidentiality rule would not reasonably be construed by employees as prohibiting a mere discussion of employee wage information, but only as prohibiting serious misconduct like misappropriating confidential personnel files and disclosing employees' medical records or social security numbers. As noted above, Member Miscimarra relied on Mediaone of Greater Florida, Inc., but the majority believed that the confidentiality rule in that case was distinguishable from Lily's confidentiality rule.

Internet Posting Rule

Lily's employee handbook also included the following policy:
"Information posted on the internet may be there forever, and employees would be well advised to refrain from posting information or comments about Lily, Lily’s clients, Lily’s employees or employees’ work that have not been approved by Lily on the internet, including but not limited to blogs, message boards, and websites. Lily will use every means available under the law to hold persons accountable for disparaging, negative, false, or misleading information or comments involving Lily or Lily’s employees and associates on the internet and may take corrective action up to and including discharge of offending employees."
The Board unanimously found this rule unlawfully overbroad because it would be reasonably construed by employees as chilling their rights to engage in protected, concerted activity.

Dresscode Rule

Lily's employee handbook also included the following policy:
"Lily Transportation Corp. provides professional services to its clients. It is extremely important that our drivers dress in a manner that reflects Lily’s professional image and reputation. Lily Transportation Corp. has instituted a Driver Uniform and Dress Code policy for drivers. Drivers must wear Lily Uniforms where required, and conform to the Dress Code while on the job as set forth below. Uniforms are comprised of: Lily Shirts (provided by Lily) Lily Hats (provided by Lily) Lily Jackets (provided by Lily) Work pants (provided by employee) Lily Vests (provided by Lily) Work shoes (provided by employee). No lettering, numbering, wording slogans or graphics are allowed on clothing worn by drivers visible to others while on the job except that which is the logo or insignia of the clothing manufacturer (i.e. Nike, Reebok, etc.). No articles of clothing may be worn displaying anything other than the Lily Logo or Insignia unless specifically approved by Lily Transportation Corp."
The Board unanimously upheld the ALJ's finding that the last sentence of the above rule was unlawfully overbroad because it would reasonably be construed by employees as prohibiting them from wearing any type of logos or insignias, including union buttons. The ALJ had rejected Lily's argument that the rule would reasonably be construed only as prohibiting employees from advertising other products while wearing a Lily uniform.

Practical Implications

Although the Board's decision in Lily Transportation Corporationappears on its face to be a straightforward application of the standard set forth in Lutheran Heritage Village-Livonia when evaluating confidentiality rules that do not expressly prohibit protected activity, Member Miscamarra's dissent highlights potential problems with that approach. As long as that standard continues to govern, however, employers must be careful to avoid broad confidentiality rules that are not accompanied either by:
  • Language clarifying that the rules are not intended to prohibit Section 7 activity.
  • Specific context and examples to avoid creating ambiguities that will be resolved against the employer.