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Trepanier MacGillis Battina P.A. 8000 Flour Exchange Building 310 Fourth Avenue South Minneapolis, MN 55415 612.455.0500

D.C. Circuit Invalidates Employer’s Policies Under National Labor Relations Act

On November 6, 2015, the D.C. Circuit held that three of four rules contained in an employer’s employee handbook were invalid. The court found that the employer’s investigative confidentiality, electronic communications, and working hours rules were invalid, but found that the employer’s rule encouraging employees to make complaints to supervisors was valid. Hyundai America Shipping Agency, Inc. v. N.L.R.B., 805 F.3d 309 (D.C. Cir. 2015). The court held that the employees might reasonably construe the first three rules to chill activities protected under the National Labor Relations Act (“NLRA“), thus making them unfair labor practices.

National Labor Relations Act
Section 8(a)(1) of the NLRA requires that employers not “interfere with, restrain, or coerce employees in the exercise of” their rights — enumerated in § 7 — to form labor organizations, bargain collectively, and engage in similar concerted activities. 29 U.S.C. §§ 157, 158(a)(1).
To decide whether an employer’s rule violates § 8(a)(1), the National Labor Relations Board (the “NLRB” or the “Board“) asks whether the rule would reasonably tend to chill employees in the exercise of their statutory rights. Guardsmark v. NLRB, 475 F.3d 369, 374 (D.C. Cir. 2007). The Board first determines whether the rule restricts § 7 activity explicitly. If the rule does not do so, the Board asks whether the rule: (1) could be reasonably construed by employees to restrict § 7 activity; (2) was adopted in response to such activity; or (3) has been used to restrict such activity. An affirmative answer to any of these three questions means that the employer can retain the rule only by presenting a legitimate and substantial business justification that outweighs the adverse effects on the interests of employees.

The case began with Sandra McCullough, a former Hyundai employee alleging that Hyundai fired her because she engaged in protected concerted activities, thus violating her § 7 rights. This led to a complaint by the Board’s General Counsel alleging not only that McCullough’s dismissal violated the NLRA but also that Hyundai had unlawfully maintained five rules violating § 8(a)(1) on their face. The administrative law judge (“ALJ“) found that Hyundai would have fired McCullough regardless of whether she had violated any of the challenged rules, and the Board affirmed. Hyundai America Shipping Agency, Inc. & Sandra L. McCullough, 357 N.L.R.B. No. 80, 2011 WL 4830117, at *2 (N.L.R.B. 2011). The ALJ, however, went on to find that all five rules violated § 8(a)(1) by interfering with protected § 7 rights. The Board affirmed that conclusion as well, deciding that the rules could be reasonably construed by employees to restrict § 7 activity and that the employer had therefore committed an unfair labor practice. Hyundai appealed.

The D.C. Circuit examined four rules where the board had jurisdiction: (1) a rule prohibiting employees from discussing matters under investigation by Hyundai (the “investigative confidentiality rule“); (2) a rule limiting the disclosure of information from Hyundai’s electronic communication and information systems (the “electronic communications rule“); (3) a rule prohibiting activities other than work during working hours (the “working hours rule“); and (4) a provision urging employees to make complaints to their immediate supervisors rather than to fellow employees (the “complaint provision“).

Investigative Confidentiality Rule
Hyundai maintained an oral rule prohibiting employees from revealing information about matters under investigation. The court stated that this blanket confidentiality rule clearly limited employees’ § 7 rights to discuss their employment, so it assessed whether Hyundai had presented a legitimate and substantial business justification for the rule, outweighing the adverse effect on the interests of employees.

Hyundai argued that federal and state antidiscrimination statutes and guidelines, which require confidentiality in many investigations, constituted a legitimate and substantial business justification for its rule. The D.C. Circuit agreed 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. The court, however, stated that Hyundai had not shown that these concerns offered a legitimate business reason to ban discussions of all investigations, including ones unlikely to present these concerns. Therefore, the court held that the Board had reasonably concluded the rule was overbroad.

Electronic Communications Rule
Hyundai’s employee handbook included a rule describing limitations on the use of the company’s electronic communications systems and concluding with the requirement that “employees should only disclose information or messages from theses [sic] systems to authorized persons.” The Board held that the rule was invalid, because a reasonable employee could read it to prevent the sharing of any information exchanged on Hyundai’s electronic communications network, thereby restricting employees’ ability to share information about the terms and conditions of employment.

The D.C. Circuit held that the Board’s conclusion was a reasonable application of existing case law. The court asked whether the electronic communications rule was more analogous to the policy challenged in Community Hospitals of Central California v. NLRB, 335 F.3d 1079 (D.C. Cir. 2003), or to the rule at issue in Cintas Corp. v. NLRB, 482 F.3d 463, 468 (D.C. Cir. 2007). In Community Hospitals, the court reversed the Board’s order invalidating a handbook rule prohibiting “[r]elease or disclosure of confidential information concerning patients or employees,” because a reasonable employee would not interpret the rule to ban discussion of the terms of his or her own employment. In Cintas, by contrast, the court enforced the Board’s order invalidating a policy that protected “the confidentiality of any information concerning the company.” That policy was distinguished from the rule in Community Hospitals on the ground that the latter expressly limited its prohibition to confidential information.

The court noted that Hyundai’s rule, unlike the one held lawful in Community Hospitals, was not limited by its terms to confidential information. It stated, however, that a reasonable reader might interpret the provision to apply only to such information, just as a reasonable reader of the rule in Community Hospitals would understand confidential information to exclude the terms and conditions of his or her own employment. Since these two cases did not clearly dictate the result in this case, the court deferred to the Board’s reasonable conclusion that Cintas controlled and that the electronic communications rule was invalid.

Working Hours Rule
Hyundai’s employee handbook included a rule allowing disciplinary action, including termination, for “[p]erforming activities other than Company work during working hours.” The Board invalidated this rule because it prohibited employees from engaging in union-related activities even during breaks. The D.C. Circuit had previously accepted the Board’s distinction between “working time,” which excludes breaks, and “working hours,” describing the period from the beginning to the end of a shift, breaks and all. United Servs. Auto. Ass’n v. NLRB, 387 F.3d 908, 914 (D.C. Cir. 2004). Restrictions on union activity during working hours are presumptively invalid; similar restrictions during working time are not. Applying this distinction, the court found that Board reasonably concluded Hyundai’s rule restricted union activity during a work shift but outside of working time.

Complaint Provision
Hyundai’s employee handbook included an employee conduct provision urging employees to “[v]oice your complaints directly to your immediate superior or to Human Resources through our ‘open door’ policy. Complaining to your fellow employees will not resolve problems. Constructive complaints communicated through the appropriate channels may help improve the workplace for all.”

The ALJ concluded that this rule implicitly prohibited complaints protected by § 7, but the D.C. Circuit disagreed. In Guardsmark, the court enforced the Board’s order invalidating a rule banning workplace complaints because the rule prevented employees from complaining to customers or to other non-supervisor employees. In enforcing that order, however, the court relied specifically on the rule’s mandatory language. Here, by contrast, the handbook urged employees to voice their complaints to their supervisors or to Human Resources, but the language was neither mandatory nor preclusive of alternatives. Moreover, the handbook did not prescribe penalties for complaints to fellow employees. The court reversed the Board, finding that a reasonable employee would not read the provision to prohibit complaints protected by § 7.

Lessons for Employers
In light of the decision in Hyundai America, employers should work with their legal counsel to fully understand what activities are protected under the National Labor Relations Act and to draft and revise their employee handbooks, personnel manuals, and work rules to avoid overly broad policies that employees might reasonably construe as restricting § 7 protected activities. Careful drafting can minimize the risk of legal challenge by the NLRB or an unfair labor practice from an employee alleging that their termination or discipline for violating a work rule is unlawful.

Minnesota employers need to understand that the NLRA’s prohibition against unlawful work rules that restrict § 7 rights apply to both “union” and “non-union” employers. Thus, private sector employers in Minnesota must carefully review their employee handbooks to comply with the NLRA even if the employer’s workforce is not unionized. Minnesota employers should also understand that the law in this area is in flux. The NLRB’s interpretation of § 8(a)(1) and § 7 rights often vary following Presidential elections, as new political appointees to the Board revisit prior decisions and reinterpret the NLRA from a different viewpoint. During the Obama administration, the NLRB has taken a more critical eye towards employer policies that previously went unchallenged.

If you have any questions about the National Labor Relations Act or your employee handbook, or you are an employer involved in a lawsuit regarding your employee policies, contact one of the Minnesota employment attorneys of Trepanier MacGillis Battina P.A. The firm can also assist you in drafting appropriate employee policies and updating your Minnesota employee handbook, personnel manual, and work rules.
About the Author: 
Minnesota employment law attorney Craig W. Trepanier practices extensively in the field of employment law, including drafting workplace policies, employee handbooks, personnel manuals, and handling litigation over employer policies. Craig may be reached at 612.455.0502 or Trepanier MacGillis Battina P.A. is a Minnesota employment law firm located in Minneapolis, Minnesota.