In what may be a harbinger of good things to come, the NLRB recently reversed an Administrative Law Judge’s (“ALJ”) finding that Macy’s, Inc.’s confidentiality policies unlawfully interfered with employees’ Section 7 rights.  Unlike many employer policy decisions issued by the Board in recent years, this case does not break new ground or saddle employers with new, unrealistic onuses.  It merely reinforces well-established rules regarding the use of sensitive customer information obtained from an employer’s records and actually reaffirms the right of employers to protect “information their employer lawfully may conceal.”

What is refreshing about this case, though, is what the Board, in a two-to-one decision by Chairman Miscimarra and Member McFerran, with Member Pearce dissenting, did not do.  Namely, it did not attach an excessively broad interpretation to rules that, while theoretically susceptible to such a construction, were clearly not intended to have such an overreaching effect.  In an era of Board decisions that have ostensibly transformed the Lutheran Heritage “reasonably construe” standard into a micromanagement weapon wielded against employers to invalidate commonplace personnel policies based on uber speculative constructions untethered to industrial realities, this case may mark the apex of this aggressive push and the beginning of a more rational Board jurisprudence.  The decision returned focus on the original intent of Lutheran Heritage.  That is, rules will only be held to per se violate employees’ rights under the Act if they explicitly restrict Section 7 rights and just because a rule could be interpreted that way does not mean it’s reasonable.

The Board reaffirmed that where a rule does not explicitly restrict Section 7 rights, it will only be found to violate the Act if it can be shown that “(1) employees would reasonably construe the language [of the rule] to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity, or (3) the rule has been applied to restrict the exercise of Section 7 rights.”

Board Finds That Employees Have No Right to Use Customer Data Acquired from Employer’s Records

At issue in this case were three rules confidentiality rules. One restricted the use of “Confidential Information,” which was defined to include “social security numbers or credit card numbers – in short, any information, which if known outside the Company could harm the Company or its business partners, customers or employees or allow someone to benefit from having this information before it is publicly known.”  The other two prohibited the disclosure of “personal data,” including customers’ “names, home and office contact information, social security numbers, drivers’ license number, account numbers and other similar data.”

The ALJ found that these rules unlawfully restricted employees’ Section 7 right to communicate with customers about their work-related concerns. The Board reversed the ALJ on the grounds that the rules only prohibited employees’ use or disclosure of sensitive data (i.e., customers’ social security and/or credit card numbers) or information obtained from the employer’s own confidential records. While the Board reaffirmed the proposition that “employees indisputably have a Section 7 right to concertedly appeal to their employer’s customers for their support in a labor dispute,” the Board held that this right did not usurp their employer’s right to protect and prevent the disclosure of “information their employer lawfully may conceal.” Neither of the Board’s justifications is particularly controversial – the Board has long recognized that employees have no right to use sensitive data or information drawn from the employer’s confidential records.

What is also notable, though, is that the majority rejected the much broader construction advocated by Member Pearce in his dissent, which would have expanded the scope of these rules beyond their apparent lawful parameters, because such a construction, while possible, was not reasonable.

Board Rejects Unreasonable Construction That Parses Out Certain Language from Entire Policy

First, the dissent argued that, as defined, “Confidential Information” would encompass customer contact information because such data could certainly benefit outside entities and/or its disclosure could harm the Company.  The Board majority rejected this contention on contextual grounds because the language attacked by the dissent was preceded by an exemplary list of sensitive personal and proprietary data.  These contextual elucidations, the majority reasoned, effectively precluded employees from reasonably interpreting the prohibition as embracing benign customer data such as names and addresses.  The majority emphasized that just because a rule may be susceptible to a particular construction does not make that construction reasonable.

Board Rejects Speculative Scenario Not Grounded In Evidence

Second, Member Pearce’s dissent argued that an employer cannot restrict the use of customer information maintained in files the employer designates as “confidential” because this information is likely available to all employees in the normal course of their employment duties.  The majority rejected this on two grounds.  First, they pointed out that the Act does not protect employees’ use of information drawn from an employer’s records merely because employees have access to it as part of their duties.  Second, “there is…no evidence in this case that the Respondent’s customer contact information was available to ‘all employees’ as the dissent contends, much less that it was used by them in the course of their normal employment duties…Our colleague’s unsupported speculation as to the Respondent’s ‘likely’ practices cannot substitute for evidence not in the record.”

In recent years, employers have reeled from the Board’s frequent unwillingness to acknowledge the reasonable and obvious intent of ordinary workplace rules and to instead concoct speculative scenarios out of whole cloth to justify finding such policies violative of the Act.  Chairman Miscimarra has long argued that this increasingly frequent approach contradicts the true intent of the Lutheran Heritage “reasonably construe” standard and has imposed impossible burdens on employers trying to craft lawful policies that protect their legitimate business interests.  Chairman Miscimarra has continuously advocated for the Board to repeal and replace the Lutheran Heritage standard because this standard is inherently susceptible to widely varying application and does little to promote the certainty and predictability employers need when promulgating workplace policies.  While the majority in Macy’s did not adopt Chairman Miscimarra’s proposed replacement, Member McFerran did agree to reject the ALJ’s interpretation of the rules and policies in question based on the constrained parsing and overreach that dominated the Obama Board’s application of the “reasonably construe”  standard.

With newly sworn in Member Marvin Kaplan and likely soon to be confirmed William Emanual, in September Chairman Miscimarra will have the first Republican majority of the Decade. However, with Chairman Miscimarra’s announced intention not to seek a second term, he will only have a couple of months in which to lead a newly construed Board in its move to the new standards and tests he has been advocating.

NLRB Acting Chair Philip Miscimarra has given the clearest indication to date of what steps a new Republican majority is likely to take to reverse key elements of the Labor Board’s hallmark actions of the Obama administration once President Trump nominates candidates for the Board’s two open seats and the Senate confirms. In each of these cases, Miscimarra highlighted his earlier opposition to the majority’s changes in long standing precedents and practices.

The Acting Chair’s Position On the Board’s 2014 Amended Election Rules – The Emphasis On “Speed Above All Else” is Inconsistent With the Law

In a strongly worded dissent in European Imports, Inc., 365 NLRB No. 41 (February 23, 2017), the Acting Chair took issue the majority’s decision to deny an Employer’s Emergency Request for Review, that sought to postpone and reschedule a representation election scheduled to take place only three days after a significant number of the employees who would be eligible to vote approximately 25%, learned that they were included in the bargaining unit, and would be affected by the outcome of the vote.

In its Emergency Request, the employer urged the Board to postpone the election by a week, to endure that the employees would know whether they would be eligible to vote and if they were, to allow them to get the facts and make an informed decision when they voted. It also argued that holding the election so soon after the issuance of the Direction of Election “would deprive many employees of sufficient notice that they would be voting in election that would dictate whether they would have union representation.”

Disagreeing with the decision of Members Mark Pearce and Lauren McFerran to deny the employer’s Emergency Request without comment, Miscimarra took issue not only with the denial of this Request, but more broadly, with the Board’s 2014 Amended Election Rule (the “Rule”) and its “preoccupation with speed between petition-filing and the election,” the Rule’s “single-minded standard” calling for “every election (to be) scheduled for ‘the earliest date practicable . . .”

Miscimarra reiterated his position, as expressed in his dissent to the Board’s adoption of the amended Election Rule in 2014, that such an emphasis on speed above all else is inconsistent with the Board’s duty under the National Labor Relations Act “to assure to employees the fullest freedom in exercising the rights guaranteed” by the Act.

The Acting Chair again called for the Board to establish “concrete parameters” for the scheduling of elections that would ensure “reasonable minimum and maximum times between the filing of a representation petition and the holding of an election.”

In addition to addressing issues of timing, Miscimarra also took issue with the fact that during the representation hearing preceding the Direction of Election. The Board’s Regional Director had refused to permit the employer to present evidence and develop a record as to why it was being prejudiced in this case by the 2014 Amended Election Rule. The Regional Director ruled that because earlier judicial challenges to the facial validity of the Election Rule had been dismissed, the employer could not litigate the actual prejudice the Rule caused in this case.

Miscimarra made clear that in his view, the fact that earlier facial challenges to the Amended Election Rule had been dismissed, questions as to the validity of the Rule, when applied to specific facts remains open and that it is a “clear error and an abuse of discretion” to deny an employer the opportunity to litigate such issues when they arise.

The Acting Chair’s Position On the Obama Board’s Handbook and E-Mail Decisions

In another dissent in Verizon Wireless Inc., 365 NLRB No. 38 (February 24, 2017)  Miscimarra reiterated his strong dispute with the way in which the Obama Board has analyzed and decided cases challenging employee handbooks and policies, writing that Board’s current standard for deciding such cases “defies common sense.”

Under the Board’s 2004 Lutheran Heritage standard, the Board will find a handbook provision or policy to violate the Act and unlawfully interfere with employees’ rights to engage in concerted, protected activity if which in part rendered work rules and handbook provisions unlawful if employees “would reasonably construe” them to prohibit protected activities under Section 7 of the Act.

The Acting Chair reiterated his view, as explained in his lengthy 2016, dissent in William Beaumont Hospital, 363 NLRB No. 162, that the Board’s current test is unworkable, and fails to adequately recognize employer’s legitimate needs of employers. Calling on the Board and the Courts to overturn and reject the Lutheran Heritage standard, Miscimarra urged the adoption in its place of a new balancing test that would not only focus on employees’ rights under the Act, but that would also take into account employers’ legitimate justifications for a particular policy or rule, such as attempting to avoid potentially fatal accidents, reduce the risk of workplace violence or prevent unlawful harassment.

Miscimarra also took direct aim in his dissent at the He also wrote that he believes the Board should overturn its Purple Communication decision allowing employee virtually unfettered use of employer email systems and return to the former standard in Register Guard, which recognized that such systems are employer property and should be recognized as such. The dissent described the standard under Purple Communications as “incorrect and unworkable,” and called for a standard that would once again recognize “the right of employers to control the uses of their own property, including their email systems, provided they do not discriminate against NLRA-protected communications by distinguishing between permitted and prohibited uses along Section 7 lines.”

What This Means for Employers

As we noted when the President appointed then Member Miscimarra to serve as Acting Chair of the Board, meaningful change in how the Board interprets and applies the Act will not come until the two vacant seats are filled and a new majority is able to act. Additionally, current General Counsel Richard F. Griffin, Jr.’s term runs through August 4, 2017.

We expect change to come as ULP issues get before the Board. It is to be expected that any new Members appointed by the President will almost certainly share Acting Chair Miscimarra’s views on such issues as use of employer email systems and the review and enforcement of workplace rules, handbooks and the like.  A new balancing test such as that proposed in the Beaumont Hospital dissent is quite foreseeable.

Concerning the Amended Election Rule, things are a bit trickier. The Rule itself was the result of formal rule making, with public comment and input after the Board published its proposed Rule in the Federal Register.  Major changes in the Rule itself would require a new Board to follow the same processes, which are quite lengthy. However, there is certainly room, as Miscimarra’s dissent in European Imports demonstrates, for the Board to make changes in how it administers and processes cases even under this Rule, before any change to the Rule itself becomes effective.  The Acting Chair’s comments concerning the right of employers and other parties to due process, including the right to develop a complete factual record on disputed, material issues is something that can be changed through the administration and application of the Rule even without formal change.  So to, it would not be surprising for a new General Counsel to give guidance to the Board’s Regional Offices calling for them to apply their discretion to avoid circumstances like those that triggered the Emergency Request in European Imports to make sure that there are no more “three day elections.”

Periods such as this, where there is transition in interpretation and enforcement, are challenging but in reality they have been a part of the history of the enforcement and application of the Act for more than 80 years.  Students of the Board often speak of a pendulum and the need for those with business before the Board to try to anticipate its swings.  Careful consideration of not just what the “law” is now, but also what it is likely to be going forward will now once again be the watchword.

 

Our colleagues Lauri F. Rasnick and Jonathan L. Shapiro, attorneys at Epstein Becker Green, have a post on the Financial Services Employment Law blog that will be of interest to many of our readers: “Policies Prohibiting ‘Insubordination or Other Disrespectful Conduct’ and ‘Boisterous or Disruptive Activity in the Workplace’ Struck Down by NLRB Majority.”

Following is an excerpt:

Once again seemingly appropriate work rules have been under attack by the National Labor Relations Board (“NLRB”). In a recent decision (Component Bar Products, Inc. and James R. Stout, Case 14-CA-145064), two members of a three-member NLRB panel upheld an August 7, 2015 decision by an Administrative Law Judge (“ALJ”) finding that an employer violated the National Labor Relations Act (“NLRA” or the “Act”) by maintaining overly broad handbook rules and terminating an employee who was engaged in “protected, concerted activity” when he called another employee and warned him that his job was in jeopardy.  Member Miscimarra concurred in part and dissented in part, arguing that the Board should overrule applicable precedent interpreting the Act.

Read the full post here.