DC Circuit Does Not Endorse NLRB's Analysis of Confidentiality Instructions During Workplace Investigations | Practical Law

DC Circuit Does Not Endorse NLRB's Analysis of Confidentiality Instructions During Workplace Investigations | Practical Law

In Hyundai America Shipping Agency, Inc. v. NLRB, the US Court of Appeals for the District of Columbia Circuit enforced in part the National Labor Relations Board's (NLRB) decision finding that five employment handbook rules violated the National Labor Relations Act (NLRA). One of the rules required employees to keep confidential matters that the human resources department was investigating. The court declined to endorse the NLRB's analysis of investigative confidentiality and its conclusions on two other handbook rules.

DC Circuit Does Not Endorse NLRB's Analysis of Confidentiality Instructions During Workplace Investigations

by Practical Law Labor & Employment
Published on 13 Nov 2015 • USA (National/Federal)
In Hyundai America Shipping Agency, Inc. v. NLRB, the US Court of Appeals for the District of Columbia Circuit enforced in part the National Labor Relations Board's (NLRB) decision finding that five employment handbook rules violated the National Labor Relations Act (NLRA). One of the rules required employees to keep confidential matters that the human resources department was investigating. The court declined to endorse the NLRB's analysis of investigative confidentiality and its conclusions on two other handbook rules.
On November 6, 2015, in Hyundai America Shipping Agency, Inc. v. NLRB, the US Court of Appeals for the District of Columbia Circuit affirmed the NLRB's conclusions that three employment handbook rules violated the NLRA, including a policy prohibiting employees from discussing matters that the human resources (HR) department was investigating. The DC Circuit:
  • Affirmed the NLRB's determination that the blanket investigation confidentiality rule was overbroad but declined to endorse the NLRB's analysis of it.
  • Declined to order the employer to rescind a rule that urged, but did not require, employees to voice work-related complaints directly to their immediate supervisor.
  • Held that the NLRB lacked jurisdiction to scrutinize a handbook rule prohibiting disclosures of information from employees' personnel files because the unfair labor practice (ULP) complaint allegation about that rule was not "closely related" to the underlying ULP charge.
( (D.C. Cir. Nov. 6, 2015).)

Background

The NLRB's General Counsel alleged that Hyundai maintained five unlawful employee handbook rules. The DC Circuit reviewed the NLRB's order invalidating those rules. (Hyundai Am. Shipping Agency, Inc., 357 N.L.R.B. slip op. 80 (Aug. 26, 2011).)

Outcome

The DC Circuit held that:
  • The NLRB's conclusions for three of the rules were reasonable applications of existing case law. In particular, the NLRB reasonably concluded that Hyundai violated Section 8(a)(1) of the NLRA by maintaining its rules:
    • prohibiting employees from disclosing matters under investigation by Hyundai;
    • limiting employees in disclosing information from Hyundai's electronic communications systems; and
    • prohibiting non-working activities during working hours.
  • The NLRB did not reasonably conclude that Hyundai's rule urging employees to voice work-related complaints to their immediate supervisors infringed on Section 7 activity.
  • The NLRB lacked jurisdiction to invalidate a personnel file confidentiality rule not alleged to be have been "closely related" to the employee's discharge (see Drug Plastics & Glass Co. v. NLRB, 44 F.3d 1017, 1021 (D.C. Cir. 1995)).

Confidentiality in Investigations

Hyundai maintained a rule prohibiting employees from revealing information about matters that Hyundai was investigating. The DC Circuit:
  • Found that:
    • the potential legitimate and substantial justification of keeping discrimination and harassment investigations confidential, especially in light of EEOC guidelines for investigations, applied to a subset of the investigations to which the blanket confidentiality rule applied;
    • the blanket investigative confidentiality rule was undifferentiated; and
    • the blanket rule was unlawfully overbroad because employees would reasonably construe it to prohibit Section 7 activity.
  • Expressly declined to ratify the NLRB's four-factor test permitting employers to require confidentiality in workplace investigations only after they determine that in any given investigation:
    • witnesses need protection;
    • evidence is in danger of being destroyed;
    • testimony is in danger of being fabricated; and
    • there is need to prevent a cover up.

Electronic Communications Rule

Hyundai maintained a rule requiring that employees disclose information from Hyundai's electronic communication systems only "to authorized persons."
The DC Circuit found that:
  • The rule was:
    • unlike a rule the DC Circuit held was valid in Community Hospitals of Central California v. NLRB that expressly prohibited disclosure only of confidential information (335 F.3d 1079 (D.C. Cir. 2003)); and
    • like a rule the DC Circuit affirmed was invalid in Cintas Corp. v. NLRB, which was not limited to prohibiting disclosures of confidential information (482 F.3d 463, 468 (D.C. Cir. 2007)).
  • The NLRB’s determination that Cintas controls was reasonable and warranted deference. An employee could reasonably interpret the rule as applying to more than confidential information.

Working Hours Rule

Hyundai maintained a rule providing that employees who performed non-work activities during working hours would be subject to discipline including termination. The DC Circuit enforced the NLRB's order to the extent it invalidated that rule, finding that:
  • Restrictions on union activity during working hours (inclusive of break periods) are generally invalid while imposing such restrictions during working time are not invalid (United Servs. Auto Ass’n v. NLRB, 387 F.3d 908, 914 (D.C. Cir. 2004)).
  • The NLRB reasonably concluded that Hyundai's rule prohibited union activity during employees' entire work shift, and was not a permissible prohibition against nonwork activities during working time.

Complaint Rule

Hyundai maintained the following complaint rule:
"Voice 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 DC Circuit reversed the NLRB's order to the extent it invalidated this rule, finding that:
  • The rule was unlike the mandatory rule precluding employees from complaining to customers or to other nonsupervisory employees that the NLRB invalidated with the DC Circuit's approval in Guardsmark v. NLRB (475 F.3d 369, 374 (D.C. Cir. 2007)).
  • The rule did not:
    • require employees to exclusively follow the complaint procedure;
    • preclude employees from pursuing alternative complaint routes; or
    • provide for penalties for employees who complained to fellow employees.
  • A reasonable employee would not interpret the rule as prohibiting protected, concerted activity.

Personnel File Rule

Hyundai maintained a rule prohibiting employees from disclosing information from personnel files without authorization. The DC Circuit found that the NLRB lacked jurisdiction to scrutinize the personnel file rule ULP complaint allegation because:
  • The NLRB General Counsel did not allege that the rule played any causal role in the charging party's discharge.
  • The NLRB General Counsel's complaint allegation about this rule was not "closely related" to the underlying ULP charge because that allegation:
    • did not involve the same legal theory as the charge allegation;
    • arose from factual circumstances or events different from the charge allegation; and
    • did not raise similar defenses as the charge allegation.
(Drug Plastics & Glass Co. v. NLRB, 44 F.3d 1017, 1021 (D.C. Cir. 1995).)

Practical Implications

The DC Circuit's decision in Hyundai America Shipping has implications in several areas. The NLRB built its investigative confidentiality analysis in the more publicized Banner Estrella Medical Center (Banner Health) on this decision's four-factor analysis. By declining to endorse the four factors, the DC Circuit puts the NLRB's analysis in Banner Estrella and that case's progeny, including Boeing, on shakier ground (see Legal Updates, HR Rep Unlawfully Requested That Employees Keep Workplace Investigation Confidential: NLRB, Investigator's Confidentiality Recommendation is Unlawful Confidentiality Mandate: NLRB).
The DC Circuit's analysis of the employer's electronic communications rule is more nuanced than the NLRB's. It illustrates that the court:
  • Is less likely than the NLRB to infer that employees will understand prohibitions on disclosing "confidential information" as prohibiting discussions or disclosures about their employment terms and conditions.
  • Distinguishes policies that prohibit disclosures of confidential information (Community Hospitals) from policies that mandate confidentiality of all company information (Cintas).
The DC Circuit's analysis of the complaint rule also is more nuanced than the NLRB's. Where an employer encourages, but neither mandates that all work-related complaints go through supervisors, nor penalizes employees for using alternative avenues for raising workplace issues, the rule is distinguishable from the one invalidated in Guardsmark.
Finally, the holding that the NLRB lacked the jurisdiction to review a policy unrelated to the underlying charge serves as a reminder that the counsel for the General Counsel must plead some kind of nexus between the facts, legal theories, or legal defenses for an allegedly unlawful personnel policy and the misconduct alleged in the underlying ULP charge. In recent years, NLRB investigators have routinely requested that employers supply copies of their employee handbooks when investigating ULP charges. If the NLRB investigator does not, as it often does, solicit or receive an amended ULP charge covering peripheral Section 8(a)(1) allegations of unlawful employment rules, the NLRB might not have jurisdiction to review and invalidate those employment rules. More importantly, it reminds employers that they may have jurisdictional arguments against Section 8(a)(1) allegations tacked-on by NLRB investigators who have gone fishing through their handbooks but who then failed to connect ULP complaint allegations to the underlying ULP charge.