Ethics Code's Confidentiality Rule Would be Understood to Prohibit Section 7 Activity: NLRB | Practical Law

Ethics Code's Confidentiality Rule Would be Understood to Prohibit Section 7 Activity: NLRB | Practical Law

In Fresh & Easy Neighborhood Market, the National Labor Relations Board (NLRB) held that a confidentiality rule in a code of business conduct prohibiting disclosure of employee information would be construed by employees to forbid protected Section 7 activity. The dissent argued that, rather than reviewing the rule in context, the NLRB is creating a presumption that a confidentialty rule is unlawful unless it contains an explicit Section 7 exception.

Ethics Code's Confidentiality Rule Would be Understood to Prohibit Section 7 Activity: NLRB

by Practical Law Labor & Employment
Published on 12 Aug 2014 • USA (National/Federal)
In Fresh & Easy Neighborhood Market, the National Labor Relations Board (NLRB) held that a confidentiality rule in a code of business conduct prohibiting disclosure of employee information would be construed by employees to forbid protected Section 7 activity. The dissent argued that, rather than reviewing the rule in context, the NLRB is creating a presumption that a confidentialty rule is unlawful unless it contains an explicit Section 7 exception.
On July 31, 2014, in Fresh & Easy Neighborhood Market, the panel (Board) heading the NLRB's judicial functions reversed an administrative law judge's (ALJ) finding, and held that a confidentiality rule in a business code of conduct prohibiting disclosure of employee information would be construed by employees to forbid protected Section 7 activity. The dissent argued that, rather than reviewing the rule in context, the Board is creating a presumption that a confidentiality rule is unlawful unless it contains an explicit Section 7 exception. (361 N.L.R.B. slip op. 8, (July 31, 2014).)

Background

Fresh & Easy Neighborhood Market, which operates a chain of California grocery stores, maintains a "Code of Business Conduct" on its website. This 20 page code covers a range of topics including ethics, confidentiality and data protection. The Confidentiality and Data Protection section of the code states in part, that employees must:
Keep customer and employee information secure. Information must be used fairly, lawfully and only for the purpose for which it was obtained.
The union filed an unfair labor practice charge and an acting NLRB regional director issued a complaint alleging that this provision violates Section 8(a)(1) of the NLRA because employees would reasonably understand the language to prohibit Section 7 activity, including discussing wages and working conditions with fellow employees and union representatives (29 U.S.C. 158(a)(1) and Lutheran, 343 N.L.R.B. 646, 646-47 (2004)).
An NLRB ALJ dismissed the complaint, concluding that the rule does not violate Section 8(a)(1) because:
  • The code of conduct is a compendium of do's and don'ts regarding business ethical conduct.
  • The confidentiality rule only addresses ethical matters, not those concerning terms and conditions of employment.
  • Employees would not interpret this portion of the rule as prohibiting the exercise of Section 7 rights.
  • The Confidentiality and Data Protection section of the Code, when considered as a whole, reasonably would be understood to prohibit dissemination of collected and confidential information unrelated to Section 7 rights.
The General Counsel appealed by filing exceptions to the ALJ's findings with the Board.

Outcome

The Board reversed the finding of the ALJ and determined that Fresh & Easy's rule was unlawful. The Board found that:
  • Employees would reasonably construe the rule to prohibit them from discussing or disclosing information about wages or terms and conditions of employment of themselves or others.
  • The rule's instruction to use employee information "only for the purpose for which it was obtained" affirms its infringement on Section 7 activity, since the company's purpose for obtaining this information was not for discussing wages or terms of employment with employees or union representatives.
  • The Board has often found stand-alone or employee handbook confidentiality rules with similar phrasing to be unlawful infringements of Section 7 rights.
  • Contrary to the employer's assertions, the Code is not dedicated exclusively to business ethics matters. It sets out rules covering broader work performance issues like an employment handbook, such as:
    • work duties; and
    • discipline for employees who do not comply.
  • The Confidentiality and Data Protection section of the Code would be reasonably interpreted to apply to all employee information, including wages and terms and conditions of employment, not just collected and confidential information.
In dissent, Member Johnson asserted that the rule did not infringe on Section 7 rights. He argued that:
  • The majority deviated from Lutheran, where the Board held that it must refrain from reading phrases in isolation or presuming improper interference of employee rights.
  • Employees would not construe the rule to be a restriction on Section 7 activity, because:
    • the Code is dedicated to ethical matters, not primarily addressing wages and terms and conditions of employment like an employee handbook. Before reaching the Confidentiality and Data Protection section of the code, employees would read sections on many other topics, allowing them to reasonably understand the code's focus; and
    • given that the rule in question is the second of three bullet points in the Confidentiality and Data Protection section, employees would reasonably interpret the rule as limiting "employee information" to information that is collected and meant to be confidential.
  • The majority is steering away from Lutheran and towards a presumption that some rules are unlawful unless they contain an explicit exception for Section 7 activity.

Practical Implications

Employers often review their handbooks and stand-alone policies for potential infringements of Section 7 rights. However, this case emphasizes that codes of conduct predominantly concerning business ethics are not immune from similar Board scrutiny. The Board majority found Fresh & Easy's rule regarding the disclosure of employee information sufficiently ambiguous that employees would reasonably construe it as prohibiting Section 7 activity such as discussing or disclosing information about their wages or terms and conditions of employment. The Board majority focused on the phrase, "the purpose for which it was obtained" and the broadness of the term, "employee information."
In light of this decision, employers should consider:
  • Reviewing their codes of conduct for ambiguities about what information cannot be disclosed.
  • Using different phrases than the ones that the Board majority scrutinized here.
  • Including in confidentiality rules, regardless of their context:
    • definitions;
    • limits on the rule's scope, such as what specifically may not be disclosed; and
    • express disclaimers that the rule restricts Section 7 activity, such as discussing or disclosing information about terms and conditions of employment.