Employment Law Daily NLRB invalidates rules barring disclosure of company info, conflict of interest policy
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Wednesday, June 15, 2016

NLRB invalidates rules barring disclosure of company info, conflict of interest policy

By Lisa Milam-Perez, J.D. National food service delivery company Schwan’s violated the NLRA by enforcing three facially neutral conduct rules that interfered with employees’ Section 7 rights, the NLRB held, directing the employer to rescind the offending provisions. Reversing a law judge’s finding that employees would construe the rules as simply protecting the company’s legitimate business and proprietary interests, the Board invalidated key portions of a confidentiality agreement that restricts the disclosure of salary information, along with three rules that were ambiguous, overly broad, or that employees would otherwise reasonably construe as restricting their exercise of protected rights under the Act. Member Miscimarra dissented in part, once again urging the Board to do away with its "reasonably construe" standard altogether (Schwan’s Home Service, Inc., June 10, 2016). Disclosure of company information. Schwan’s handbook rule barred employees from sharing (among other things) "information concerning customers, vendors, or employees." The Board majority concluded that employees would read this provision as precluding them from sharing employee information with each other or third parties, including union representatives. Given its lack of "contextual clarity," the Board disagreed with the law judge that reasonable employees would understand they were restricted merely from disclosing confidential proprietary information. Faced with ambiguity as to what information is being prohibited from disclosure, employees would likely err on the side of caution and refrain from exercising their protected right to share workplace information lest they face potential discipline for infractions. "Schwan’s business shall not be discussed with anyone who does not work for Schwan or with anyone who does not have a direct association with the transaction," another clause provided. This was ambiguous and overly broad, as it "reasonably encompasses any and all facets of employee terms and conditions of employment." Because employees have a protected right to share employment-related information with the Board, union representatives, or the media, an employer violates the Act by imposing such restrictions on their discussions. Use of company name. Another policy required employees to obtain permission before disseminating information containing the company name. "Any articles, speeches, records of operation, pictures or other material for publication, in which the company name is mentioned or indicated, must be submitted, through your supervisor, for approval or disapproval by the Corporate Communications and Law Departments prior to release," it provided. Finding the rule unlawful, the majority noted that employees "have a clear right under the Act to publicize labor disputes," and this provision contravenes this well-established principle. The employer argued that its rule only restricted employees from purporting to speak on the company’s behalf; however, the Board saw no support for this assertion in the broad language of the proscription. Also, the fact that the rule applied only to "publication" of materials didn’t save it. "Even if that term is construed narrowly to apply only to the placement of material in a newspaper or other document of general circulation, it still prohibits employees from, e.g., writing letters to the editor or opinion pieces regarding labor disputes without preapproval," the Board wrote, invalidating the restriction. Conflict of interest. Schwan’s conditioned continued employment on the strict avoidance of conduct, on-duty or off, that "is detrimental to the best interests of the company or its employees." The "best interests" reference was too "amorphous" for the majority’s liking, and it offered no clarifying examples of prohibited conduct or any language that would confine the scope of the restriction to make it clear that Section 7 activity was not within its reach. The extent of the prohibition, instead, was left to Schwan’s discretion, and if the employee got it wrong, it was grounds for discharge. "In these circumstances, a reasonable employee would assume that the Respondent would not consider Section 7 activity such as labor protests or public criticism of its policies to be in its best interests, and might then refrain from engaging in such activity," the Board found. The majority was not convinced that the context of the rule as a whole served to restrain its reach. Its surrounding subparagraphs (which were not challenged) narrowly identified specific, legitimate business concerns at stake—fraud, waste, improper financial considerations; not so, however, with the "best interests" provision, which was too attenuated in substance, if not in form, to these permissible restrictions. ECONA policy. The company’s Employment, Confidentiality, Ownership & Noncompete Agreement (ECONA), which employees must sign and comply with as a condition of employment, unlawfully prohibits employees from sharing information about "wages, commissions, performance, or identity of employees." It explicitly bars employees from disclosing such information, either directly or indirectly, to "any person not in the employ" of the company. It also prohibits the employee from using such information to his or her own benefit or the benefit of a third party or employer, or to Schwan’s detriment, or to seek work elsewhere or solicit employees. Schwan’s urged that its rule was simply meant to prevent competitors from recruiting its employees. However, the restriction also barred employees from providing this information to union representatives, which is clearly protected Section 7 activity. As such, it was unlawful under Lutheran Heritage, and the Board saw no need to consider the law judge’s finding that employees would construe the provision as such. Dissent. Member Miscimarra agreed that the rule barring the disclosure of company information was unlawful; however, he saw no problem with the other provisions. The larger point of his lengthy dissent, however, was to renew his plea that the Board should overrule its Lutheran Heritage "reasonably construe" standard—or that the courts should repudiate it. In his view, the Supreme Court has instructed the NLRB to balance the employer’s legitimate justifications for promulgating a challenged rule against its potential adverse impact on employees’ NLRA-protected activity, and the current approach fails to heed this directive. Rebuffing his critique that the current framework was "exceptionally difficult to apply" and led to arbitrary results, however, the majority countered that Miscimarra’s proposed approach "promises neither to simplify the required analysis nor to produce more predictable outcomes" and, what’s more, was "tilted against Sec. 7 rights."

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