Employment Law Daily Quicken Loans’ confidentiality and non-disparagement work rules violate NLRA
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Tuesday, August 2, 2016

Quicken Loans’ confidentiality and non-disparagement work rules violate NLRA

By Ronald Miller, J.D. Because there was nothing arbitrary or capricious about an NLRB decision finding that an employer’s Confidentiality Rule and Non-Disparagement Rule ran afoul of the NLRA, the D.C. Circuit denied the employer’s petition for review and granted the Board’s cross-application for enforcement. The Board appropriately determined that employees would reasonably construe the sweeping prohibitions in Quicken’s Confidentiality and Non-Disparagement Rules as trenching upon their rights to discuss and object to employment terms and conditions, and to coordinate efforts and organize to promote employee interests, explained the appeals court. Additionally, the court determined that there was no abuse of discretion in the Board’s hearing process (Quicken Loans, Inc. v. NLRB, July 29, 2016, Millett, P.). Objective inquiry. Whether workplace rules run afoul of Section 7’s protections turns on an objective inquiry into "‘whether the rules would reasonably tend to chill employees in the exercise’ of their statutory rights." Unreasonable chilling of lawful employee activities can take two forbidden forms. First, a rule could on its face restrict protected Section 7 activity by, for example, explicitly barring employees from complaining to third parties about their working conditions. Second, even if facially unobjectionable, a rule is invalid if (i) "‘employees would reasonably construe the language to prohibit Section 7 activity’"; (ii) the rule "‘was promulgated in response to union activity’"; or (iii) "‘the rule has been applied to restrict the exercise of Section 7 rights.’" Moreover, the "‘mere maintenance’ of a rule likely to chill Section 7 activity, whether explicitly or through reasonable interpretation, can amount to an unfair labor practice ‘even absent evidence of enforcement’" of the rule by the employer. Confidentiality and non-disparagement rules. Quicken imposed a number of workplace rules on its mortgage bankers, including forbidding them to use or disclose a broad range of personnel information without the company’s prior written consent or to criticize publicly the company and its management. Two of those rules were at issue here: the Confidentiality Rule and the Non-Disparagement Rule. An employee working as a mortgage banker signed a copy of an employment agreement containing both the Confidentiality and Non-Disparagement Rules. In 2011, she resigned and took a job with a competitor. Quicken then sued the employee for violating no-contact/no-raiding and no-competition provisions of the employment agreement. The employee responded by filing an unfair labor practice charge with the NLRB alleging that the Confidentiality and Non-Disparagement Rules interfered with Quicken employees’ Section 7 rights, in violation of the NLRA. The NLRB determined that those rules ran afoul of the NLRA because they unreasonably burden the employees’ ability to discuss legitimate employment matters, to protest employer practices, and to organize. Personnel information. The D.C. Circuit found the Board properly determined that Quicken’s Confidentiality Rule, as applied to personnel information, directly impinged upon employees’ Section 7 rights. The very information that portion of the Rule explicitly forbid employees to share—personnel lists, employee rosters, and employee contact information—has long been recognized as information that employees must be permitted to gather and share among themselves and with union organizers in exercising their Section 7 rights. So too for "handbooks" and other types of workplace information contained in "personnel files," said the court. Quicken’s blanket prohibition directly interfered with its mortgage bankers’ ability to discuss their wages and other terms and conditions of employment with their fellow employees or union organizers, which is a core Section 7 right. Quicken’s objections to the Board’s determination all failed. First, Quicken contended that the Board should have considered whether (i) its employees actually construed the Confidentiality Rule to prohibit Section 7 activity, (ii) the employee had understood the rule that way during her employment, or (iii) it had ever enforced the rule to interfere with Section 7 activity. Those arguments, however, failed to come to grips with governing law. The validity of a workplace rule turns not on subjective employee understandings or actual enforcement patterns, but on an objective inquiry into how a reasonable employee would understand the rule’s disputed language. Thus, the Board was merely required to determine whether ‘employees would reasonably construe the disputed language to prohibit Section 7 activity, and not whether employees have thus construed the rule. That objective inquiry allows the Board to block rules that might chill the exercise of employees’ rights by cowing the employees into inaction, rather than forcing the Board to "wait until that chill is manifest," and then try to "undertake the difficult task of dispelling it." And the Board’s concern about discouraging protected employee activities exists just the same "whether or not that is the intent of the employer." Legitimate business interest. Second, Quicken argued that the Board overlooked the company’s "substantial and legitimate interest" in protecting its nonpublic information in a business that is "highly-regulated, competitive, and involves substantial and significant confidential and proprietary information." However, the appeals court pointed out that by carefully confining its decision to the Confidentiality Rule’s operation on the types of personnel information protected by Section 7, the Board left portions of the rule protecting proprietary information intact, and it afforded Quicken adequate room to revise and "narrowly tailor the rule to achieve its goal without interfering with section 7 activity." Third, Quicken argued that the Board ignored that the rule’s "disputed language only protects non-public information of co-workers." The problem with that argument was that the so-called "widely publicized" personnel information to which Quicken referred was little more than a general description on its recruiting website of the mortgage banker position and the generic salary and benefits packages that might be available to successful applicants. Non-disparagement rule. By its plain terms, the Non-Disparagement Rule barred mortgage bankers from "publicly criticizing, ridiculing, disparaging or defaming the Company or its products, services, policies, directors, officers, shareholders, or employees" in any written or oral statement, including on the Internet or even in private emails. The Board quite reasonably found that such a sweeping gag order would significantly impede mortgage bankers’ exercise of their Section 7 rights because it directly forbid them to express negative opinions about the company, its policies, and its leadership in almost any public forum, concluded the court. Procedural complaint. Finally, Quicken lodged a procedural complaint, arguing that the Board erroneously excluded its evidence about whether the employee (i) actually read the employment agreement prior to filing her charge; (ii) subjectively believed that the agreement forbade protected conduct; (iii) believed she had violated the Confidentiality and Non-Disparagement Rules; or (iv) discussed the agreement with her managers or supervisors at Quicken. Here, the appeals court found that the Board’s evidentiary determinations were not even close to an abuse of discretion. Quicken’s proffered evidence about how the employee in particular understood the rules or reacted to them misconceived the relevancy of information under the governing legal test. Consequently, the evidence’s exclusion was both proper and entirely non-prejudicial, explained the court.

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