Vermont Bar Association

Seminar Materials

56th

Mid-Year Meeting

Employment Law: Agents of Change

March 15, 2013

Sheraton Burlington

Faculty:

Dirk Anderson, Esq.

Lindsay N. Browning, Esq.

Elizabeth K. Rattigan, Esq.

Stephen D. Ellis, Esq.

Caroline S. Earle, Esq.

Julio A. Thompson, Esq.

J. Stephen Monahan, Esq.

2:00: Stephen D. Ellis: Introduction

Questions for presenters:

1. What are the statutory bases for administrative activity?

2. What are the statements of policy guiding the agencies?

3. What are the current administrative/legislative priorities and how were they derived?

4. How are the agencies implementing those priorities?

5. Written materials:

a. Current biographical information

b. Summary (preferred) or outline of presentation content with links to sources.

2:05: Caroline Earle/Lindsay Browning: EEOC and OFCCP Rulemaking and SEP; Vermont

Administrative and Legislative initiatives

ADAAA

Family Responsibilities and Caregiver Discrimination

Equal Pay

Reasonable factors other than age

Undocumented workers

USERRA

Background Checks

References

Update on proposed amendments to VFEPA re equal pay, retaliation

2:30 Julio Thompson: Vermont Attorney General, Civil Rights Unit

Prioritizing Claims/Investigations

Coordination with EEOC SEP

Status of Equal Pay Legislation in Vermont

3:00 Elizabeth Rattigan: US DOL/NLRB Initiatives

NLRB Rulemaking, Guidance and Enforcement Actions relating to:

o Social media

o Confidentiality

o Section 7 rights

Distinguish VLRB from NLRB

o Enabling statutes/ policy statements

3:30 J. Stephen Monahan/ Dirk Anderson: Vermont Department of Labor Priorities/Initiative

Wages and Hours of Work:

o Misclassification

o Overtime exemptions

o Remote employment

3:45 Q&A

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EMPLOYMENT LAW: AGENTS FOR CHANGE

Presenters: Lindsay Browning, Esq. and Caroline S. Earle, Esq.

Topics Covered:

ADAA

Family Responsibilities and Caregiver Discrimination

Equal Pay

Reasonable Factors Other Than Age

Undocumented Workers

USERRA

Background Checks

References

A. The Americans with Disabilities Act Amendments Act of 2008

The ADA prohibits discrimination by an employer “against a qualified

individual on the basis of disability.” 42 U.S.C. § 12112(a). The ADA defines

disability as “a physical or mental impairment that substantially limits one

or more major life activities.” 42 U .S.C. § 12102(1)(A).

On September 25, 2008, President George Bush signed the Americans

with Disabilities Amendments Act of 2008 (“ADAAA”), which amended the

1990 ADA and expanded the definition of disability. 42 U.S.C. § 12112(a).

The ADAAA explicitly overturned two controversial Supreme Court

decisions and rejected the high standards imposed in these cases that limit

the rights of disabled persons. See Sutton v. United Airlines, 527 U.S. 471

(1999) (holding impairments must be considered in their mitigated state);

Toyota Motor v. Williams, 534 U.S. 184 (2002) (finding the determination of a

disability depended on whether the individual is unable to perform tasks

central to people’s daily lives, not whether the individual is unable to perform

the tasks associated with a specific job).

The Act retained basic terms such as “substantially limits,” and “major

life activities.” However, the ADAAA emphasizes that the definition of

disability should be construed in favor of broad coverage of individuals to the

maximum extent permitted and generally shall not require extensive

analysis. 42 U.S.C. § 12102(4)(A). The ADAAA also prohibits consideration

of mitigating measures such as medication, assistive technology,

accommodations, or modifications when determining whether an impairment

substantially limits a major life activity. 42 U.S.C. § 12112(a).

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The Equal Employment Opportunity Commission (“EEOC”) is

generally responsible for enforcing federal anti-discrimination employment

laws. The EEOC amended its ADA regulations to reflect ADAAA changes. 29

C.F.R. 1630.2, et. seq.

Relevant Links:

o ADAAA statute text: http://www.eeoc.gov/laws/statutes/adaaa.cfm

o EEOC Final ADAAA regulations:

https://www.federalregister.gov/articles/2011/03/25/2011-

6056/regulations-to-implement-the-equal-employment-provisions-of-

the-americans-with-disabilities-act-as

o EEOC Fact Sheet:

http://www.eeoc.gov/laws/regulations/adaaa_fact_sheet.cfm

o Facts about the ADA: http://www.eeoc.gov/eeoc/publications/fs-ada.cfm

o Questions and Answers on the Final ADAAA Rule:

http://www.eeoc.gov/laws/regulations/ada_qa_final_rule.cfm

o Sutton v. United Air Lines, 527 U.S. 471 (1999):

http://www.law.cornell.edu/supct/html/97-1943.ZS.html

o Toyota Motor v. Williams, 534 U.S. 184 (2002):

http://www.law.cornell.edu/supct/html/00-1089.ZO.html

B. Family Responsibilities and Caregiver Discrimination

No federal law expressly prohibits Family Responsibilities Discrimination

(FRD) against workers based on their family caregiving responsibilities. Certain

circumstances, however, may constitute unlawful discrimination under other

federal statutes, such as Title VII of Civil Rights Act, Pregnancy Discrimination Act

under Title VII, and Family and Medical Leave Act.

The Family and Medical Leave Act (FMLA) requires certain employers to

grant up to 12 weeks of leave during a 12 month period to eligible employees who

need time off because of a "serious health condition" that they or someone in their

family is experiencing. 29 U.S.C. 2601, et seq.

Vermont law requires many employers to allow full-time employees to take

up to 12 weeks per year of unpaid leave for pregnancy, birth, adoption, or serious

illness of themselves or close family members. Employers may not retaliate against

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employees who exercise their rights under the law and normally must reinstate

employees in their jobs on return from leave. 21 V.S.A. § 470.

Short term leave: Vermont law also allows many employees to take up to 24

hours per year (4 hours per month) of short-term unpaid leave for routine medical

and dental care, children’s academic needs, medical emergencies, and the like. 21

V.S.A. § 472a.

Vermont Nursing Mothers: For 3 years after birth of a child, employers must

provide reasonable time (compensated or not) to allow employees to express milk in

an appropriate private space (not a bathroom stall), unless doing so would

substantially disrupt operations. See 21 V.S.A. § 305.

An increasing proportion of caregiving goes to the elderly and the trend will

continue as the Baby Boomer population ages. See generally Peggie R. Smith, Elder

Care, Gender, and Work: The Work-Family Issue of the 21st Century, 25

BERKELEY J. EMP. & LAB. L. 351, 355-60 (2004).

According to the EEOC, some best employment practices to adapt to the

continuing caregiver trend are below:

o employers adopting flexible workplace policies that help employees achieve a

satisfactory work-life balance may not only experience decreased complaints

of unlawful discrimination, but may also benefit their workers, their

customer base, and their bottom line; and

o encouraging employers to develop a strong EEO policy that addresses

caregiver protections.

Relevant Links:

o EEOC Guidance: http://www.eeoc.gov/policy/docs/caregiving.html

o EEOC Caregiver Best Practices:

http://www.eeoc.gov/policy/docs/caregiver-best-practices.html#-1

o Federal Family and Medical Leave Act Statute text:

http://www.dol.gov/whd/regs/statutes/fmla.htm

o Vermont Parental and Family Leave Act (“PFLA”): 29 U.S.C. 2601, et

seq.

o Vermont Fair Employment Practices Act:

http://www.leg.state.vt.us/statutes/fullsection.cfm?Title=21&Chapter=

005&Section=00495

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o Pregnancy Discrimination Act:

http://www.eeoc.gov/laws/statutes/pregnancy.cfm

o Vermont Nursing Mothers in Workplace:

http://www.leg.state.vt.us/statutes/fullsection.cfm?Title=21&Chapter=

005&Section=00305

C. Equal Pay

The Equal Pay Act of 1963 requires that men and women in the same

workplace be given equal pay for equal work. See 29 U.S.C. 206(d).

An individual alleging a violation of the EPA may go directly to court and is

not required to file an EEOC charge beforehand. The time limit for filing an EPA

charge with the EEOC and the time limit for going to court are the same: within

two years of the alleged unlawful compensation practice or, in the case of a willful

violation, within three years. EEOC implemented Equal Pay regulations at 29

CFR § 1620.1.

The Lily Ledbetter Fair Pay Act of 2009 clarified that each paycheck

containing discriminatory compensation is actionable under the Equal Pay Act

(from last paycheck, have 180 days or 300 in jurisdictions, like Vermont, that have a

local or state law prohibiting unequal pay).

Vermont similarly requires that men and women receive equal pay for equal

work that requires equal skill, effort, and responsibility. 21 V.S.A. § 495(8)

According to the DOL, some best employment practices concerning equal pay

issues are below:

designate individuals who will be responsible for monitoring pay

practices and reviewing compliance with law,

evaluate compensation system annually for potential pay

disparities,

evaluate all forms of compensation (starting salary, benefits,

bonuses, shift differentials, overtime, training, etc),

correct problems as soon as discovered, and

evaluate how raises are given and whether all workers have

equal opportunities.

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Relevant Links:

o The Equal Pay Act of 1963: http://www.eeoc.gov/laws/statutes/epa.cfm

o Equal Pay Best Practices: http://www.dol.gov/equalpay/equalpay-

employer.pdf

o Vermont Equal Pay Act:

http://www.leg.state.vt.us/statutes/fullsection.cfm?Title=21&Chapter=

005&Section=00495

o EEOC Facts about Equal Pay:

http://www.eeoc.gov/eeoc/publications/fs-epa.cfm

o EEOC Equal Pay Regulations:

http://www.eeoc.gov/laws/types/equalcompensation_regulations.cfm

o The Lily Ledbetter Fair Pay Act of 2009:

http://www.gpo.gov/fdsys/pkg/PLAW-111publ2/html/PLAW-

111publ2.htm

D. Reasonable factors other than age

The Age Discrimination in Employment Act (“ADEA”) of 1967

prohibits employment discrimination against people who are 40 years or

older.

In addition to prohibiting intentional discrimination against older

workers (known as “disparate treatment”), the ADEA prohibits practices

that, although facially neutral with regard to age, have the effect of harming

older workers more than younger workers (known as “disparate impact”),

unless the employer can show that the practice is based on a “reasonable

factor other than age (RFOA).”

The final April 2012 RFOA rule clarifies that the ADEA prohibits

policies and practices that can have the effect of harming older employees,

unless the employer can show that the policy or practice is based on a RFOA.

The rule emphasizes the need for an individualized consideration of the facts

and circumstances surrounding the particular situation and offers a non-

exhaustive list of factors relevant to establishing a RFOA defense. See 29

C.F.R. Part 1625.

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The listed RFOA factors are as follows:

(i) The extent to which the factor is related to the employer’s stated

business purpose;

(ii) The extent to which the employer defined the factor accurately and

applied the factor fairly and accurately, including the extent to which

managers and supervisors were given guidance or training about how to

apply the factor and avoid discrimination;

(iii) The extent to which the employer limited supervisors’ discretion to

assess employees subjectively, particularly where the criteria that the

supervisors were asked to evaluate are known to be subject to negative age-

based stereotypes;

(iv) The extent to which the employer assessed the adverse impact of

its employment practice on older workers; and

(v) The degree of the harm to individuals within the protected age

group, in terms of both the extent of injury and the numbers of persons

adversely affected, and the extent to which the employer took steps to reduce

the harm, in light of the burden of undertaking such steps.

See 29 C.F.R. Part 1625.

Relevant Links:

o EEOC RFOA Final Rule:

o https://www.federalregister.gov/articles/2012/03/30/2012-

5896/disparate-impact-and-reasonable-factors-other-than-age-

under-the-age-discrimination-in-employment

o ADEA Statute: http://www.eeoc.gov/laws/statutes/adea.cfm

o EEOC Questions and Answers on RFOA Final Rule:

http://www.eeoc.gov/laws/regulations/adea_rfoa_qa_final_rule.cfm

E. Undocumented workers

Undocumented workers have no remedies under the National Labor

Relations Act. See Hoffman Plastic Compounds, Inc. v. National Labor

Relations Board, 122 S. Ct. 1275 (2002). In Hoffman, the Supreme Court

denied reinstatement and back pay remedies to undocumented workers who

had been terminated for protected union activity but had not left the country.

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The Court reasoned the workers were still “unavailable” for work, despite

their continued presence in the country, given their lack of proper work

authorization.

Undocumented workers do, however, have rights under FLSA and Title

VII. Madeira v. Affordable Hous. Found., Inc., 469 F.3d 219, 243 (2d

Cir.2006) (noting that majority of courts to address the question have

concluded that Hoffman Plastic does not preclude FLSA awards for backpay).

In its June 27, 2002 “Rescission of Enforcement Guidance on Remedies

Available to Undocumented Workers Under Federal Employment

Discrimination Laws,” the EEOC stated, “The Supreme Court's decision in

Hoffman in no way calls into question the settled principle that

undocumented workers are covered by the federal employment

discrimination statutes and that it is as illegal for employers to discriminate

against them as it is to discriminate against individuals authorized to work.”

Relevant Links:

o EEOC policy guidance: http://www.eeoc.gov/policy/docs/undoc-

rescind.html.

http://www.eeoc.gov/policy/docs/qanda-undoc.html

o Hoffman Plastic Compounds, Inc. v. National Labor Relations Board,

122 S. Ct. 1275 (2002):

http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=US&vol=000&in

vol=00-1595

o Madeira v. Affordable Hous. Found., Inc., 469 F.3d 219, 243 (2d

Cir.2006): https://bulk.resource.org/courts.gov/c/F3/469/469.F3d.219.04-

3700-.04-3606-.html

F. United Services Employment and Reemployment Rights Act of 1994

(USERRA)

USERRA protects civilian job rights and benefits for veterans and members

of the active and Reserve components of the U.S. armed forces. USERRA

provides that returning service-members must be promptly reemployed in the

same position (or one of equal pay and status) that they would have attained had

they not been absent for military service, with the same seniority, status and

pay, as well as other rights and benefits determined by seniority. 38 U.S.C. §§

4301.

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o Department of Labor enforcement

Fact sheet:

http://www.dol.gov/vets/programs/userra/userra_fs.htm

Regulations:

http://www.dol.gov/vets/regs/fedreg/final/2005023960.htm

G. Background Checks

According to the EEOC, there are two ways in which an employer's use of

criminal history information may be discriminatory. First, Title VII of the Civil

Rights Act of 1964 prohibits employers from treating job applicants or employees

with the same criminal records differently because of their race, national origin, or

another protected characteristic (disparate treatment discrimination).

Second, the law similarly prohibits disparate impact discrimination. In other

words, if criminal record exclusions operate to disproportionately exclude people of a

particular race or national origin, the employer has to show that the exclusions

are “job related and consistent with business necessity” under Title VII to avoid

liability.

Green factors relevant to assessing whether an exclusion is job related for the

position in question and consistent with business necessity are as follows:

The nature and gravity of the offense or conduct,

The time passed since the offense or conduct and/or completion of the

sentence, and

The nature of the job held or sought.

Arrests are not proof of criminal conduct. Also, an across-the-board policy

exclusion from employment is inconsistent with the Green factors, because it does

not focus on the dangers of particular crimes and the risks in particular positions.

EEOC Charge: Pepsi settlement re: background checks:

http://www.eeoc.gov/eeoc/newsroom/release/1-11-12a.cfm

Other Relevant links:

o EEOC Guidance:

http://www.eeoc.gov/laws/guidance/arrest_conviction.cfm

http://www.eeoc.gov/laws/guidance/qa_arrest_conviction.cfm

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H. Retaliation

o Retaliation charges are the majority of charges filed with the EEOC.

EEOC Statistics:

http://www.eeoc.gov/eeoc/statistics/enforcement/retaliation.cfm

Facts About Retaliation: http://www.eeoc.gov/laws/types/facts-

retal.cfm

o Vermont Retaliation: 21 V.S.A. § 710 (“unlawful discrimination”)

(d): An employer shall not retaliate or take any other negative

action against an individual because the employer knows or

suspects that the individual has filed a complaint with the

department or other authority, or reported a violation of this

chapter, or cooperated in an investigation of misclassification,

discrimination, or other violation of this chapter.

OFCCP

o The purpose of the Office of Federal Contract Compliance Programs

(OFCCP) is to enforce, for the benefit of job seekers and wage earners,

the contractual promise of affirmative action and equal employment

opportunity required of those who do business with the Federal

government. http://www.dol.gov/ofccp/aboutof.html

NLRB Rulemaking, Guidance and Enforcement Actions

Relating to Social Media, Confidentiality,

At-Will Employment

Elizabeth Rattigan, Director Downs Rachlin Martin PLLC

8 South Park Street, PO Box 191 Lebanon, New Hampshire 03766

603-448-2211 www.drm.com

http://www.drm.com/attorney/elizabeth-rattigan

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NLRB Rulemaking, Guidance and Enforcement Actions Relating to Social Media, Confidentiality, At-Will Employment

I. NLRB Background The National Labor Relations Board (“NLRB”), has publicized an initiative to expand awareness of the National Labor Relations Act’s (“NLRA”) protections among non-unionized workforces. The NLRB, the acting general counsel of the NLRB and the NLRB Regional Offices have been have been very active in the past year deciding whether employment policies and handbook rules violate NLRA Section 7 rights of employees. At risk of being challenged is any employer policy that could reasonably be understood by an employee to interfere with rights protected under the NLRA. To understand the Board’s recent decisions, it is helpful to understand the structure of the NLRA. Section 7 of the NLRA is the vehicle for NLRB regulation of personnel policies. Section 7 provides:

“Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection…”

Section 8(a)(1) of the NLRA prohibits employers from interfering with employees’ exercise of Section 7 rights:

“An employer violates Section 8(a)(1) when it maintains a work rule that reasonably tends to chill employees in the exercise of their Section 7 rights.”

If the rule or policy explicitly restricts Section 7 rights, it is unlawful. If it does not, the existence of a violation is dependent upon a showing of one of the following: (1) employees would reasonably construe the rule’s language 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.

Section 7 protects private sector employees in both union and non-union workplaces. It guarantees that employees have the right to discuss wages and benefits and other terms and conditions of employment with co-workers or third parties including unions, media, customers, and others and to take action with one or more co-workers to improve working conditions by, among other means, raising work-related complaints directly with the employer, a government agency, a union, the media, or other third parties. In exercising Section 7 rights, employees do not necessarily lose the protection of the law simply because their concerted activities are, in the view of the employer, discourteous, divisive, disparaging, or even offensive or profane.

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II. NLRB on Social Media A. General Counsel Report on Social Media The National Labor Relations Board has fully adjudicated and issued decisions in only a handful of cases involving social media policies. Much of the currently-existing guidance is found in a series of reports issued by the NLRB’s General Counsel, reporting on the enforcement positions the General Counsel has taken in cases in which employers’ social media policies were investigated in response to unfair labor practice charge filings. The General Counsel’s May 2012 report analyzed seven employers’ social media policies.1 It found that six of the policies interfered with employees’ rights under the NLRA. The General Counsel found that one of the policies, which had been issued by Wal-Mart, did not violate any NLRA provisions. That policy is included at the end of the General Counsel’s May 2012 report. Although the General Counsel’s determinations do not carry the same legal force as NLRB decisions (or court decisions), they represent the likely direction of the law if the NLRB were to agree with the General Counsel. Generally, the NLRB and the General Counsel have taken an expansive view of social media policies in assessing their impact on protected activity. Distilling the General Counsel’s guidance into a few concrete tips, employers should consider the following when drafting social media policies: be mindful of the NLRA, avoid broad prohibitions, include examples whenever possible, and include a savings clause. The goal is to have a policy outlining misconduct in a sufficiently precise but narrow way so that an employee could not wrongly assume the policy bars Section 7 activity. More specifically:

• Avoid broad courtesy or other civility rules; • Avoid broad prohibitions on disclosure of company information; • When including prohibitions, be specific regarding key prohibitions such as the

following: Employees must not: o Disclose of misuse company intellectual property or trade secrets and other

confidential business information (offer examples); o Disparage customers or the company’s products or services o Threaten violence o Engage in unlawful harassment or discrimination o Violate copyright and other laws o Breach FTC rules by making posts about products/services without disclosing

connection to the company o Make posts in which they represent they are speaking on behalf of the company;

There has been one notable divergence between the opinion of the General Counsel and the Board. The General Counsel opined that a disclaimer stating that a policy does not limit Section 7 rights will not generally save an otherwise unlawful social media policy. In contrast, in the Costco decision, discussed below, the Board inferred that a disclaimer might have saved the

1 http://mynlrb.nlrb.gov/link/document.aspx/09031d4580a375cd

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unlawful social media policy which it found violated Section 7 rights. The Board stated, “there is nothing in the rule that even arguably suggests that protected communications are excluded from the broad parameters of the rule.” Therefore, it is prudent to include a disclaimer that expressly states that nothing in the policy limits activity protected by Section 7 of the NLRA.

B. NLRB Cases Involving Social Media 1. Costco Wholesale Corp. – Electronic Posting Policy Invalidated The NLRB issued its first published opinion on social media policies in September 2012, when it invalidated Costco’s electronic positing rule that prohibited defamatory statements. In Costco Wholesale Corp., 358 NLRB 106 (2012)2, the NLRB held that Costco's electronic posting policy, which prohibited electronically posted statements that "damage the Company, defame any individual or damage any person's reputation," violated the NLRA because it could deter employees from engaging in Section 7 protected communications critical of Costco.

Background

Costco Wholesale Corporation had several rules regulating employee speech that prohibit employees from posting or distributing materials on company property, discussing other employees' private matters (such as leaves of absence), and sharing or transmitting employees' sensitive financial and other personal information. Costco also prohibited employees from electronically posting statements that "damage the Company, defame any individual or damage any person's reputation, or violate the policies outlined in the Costco Employee Agreement" and prohibited employees from leaving the employer's premises without permission. Employees who violated these rules could be subject to discipline, up to and including termination. The United Food and Commercial Workers union challenged these rules by filing unfair labor practice charges. Aside from the electronic positing rule, the administrative law judge (ALJ) held that the challenged rules regulating employee communication violated Section 8(a)(1) of the NLRA because the unit employees could reasonably construe the language of the rules to prohibit protected concerted activity under Section 7 of the NLRA. The ALJ held that the employees would not reasonably construe the electronic posting rule as regulating and thereby prohibiting Section 7 activity. Rather, the employees would reasonably infer that the purpose of the electronic posting rule was to create a "civil and decent workplace." Therefore, the ALJ dismissed that complaint allegation. Costco and the counsel for the NLRB's General Counsel filed exceptions to the ALJ's decision with the NLRB. NLRB Decision Reverses ALJ on Electronic Posting Rule

On September 7, 2012, the Board issued a decision in Costco, affirming the ALJ on most issues except reversing the ALJ’s decision regarding the electronic posting rule. The Board held that the electronic posting rule regarding defamation was unlawful because it could reasonably tend to chill employees in the exercise of their Section 7 rights. An employer rule is unlawful if it explicitly restricts Section 7 rights. Under well-established Board precedent in Lutheran

2 http://mynlrb.nlrb.gov/link/document.aspx/09031d4580c45356

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Heritage Vill.-Livonia, if the rule does not explicitly restrict Section 7 rights, it is still unlawful if:

• Employees would reasonably construe it to prohibit Section 7 activity. • It was promulgated in response to union activity. • It has been used to restrict the exercise of Section 7 rights.

The Board found that the electronic posting rule was overbroad. Although the rule does not explicitly restrict Section 7 rights, employees could reasonably construe it to prohibit Section 7 activity, because employee statements that criticize or protest the terms and conditions of employment could "damage the Company, defame any individual or damage any person's reputation." The Board noted that the overbroad rule did not provide any exception for employee statements that are protected by Section 7. Therefore, it determined that the rule could reasonably tend to chill employees in the exercise of their Section 7 rights. 2. Karl Knauz Motors, Inc.-Upheld Facebook Firing On One Post But Not The Other On September 28, 2012, in Karl Knauz Motors, Inc., 358 NLRB 164 (2012)3, the NLRB upheld the termination of an employee who made two Facebook posts, one of which contained tactless comments about an automobile accident involving a customer at his employer's dealership because the comments were not concerted or protected under the NLRA. The other post was found to be protected activity under Section 7. The NLRB invalidated the employer's "courtesy rule," which instructed employees to treat customers and fellow employees with respect and courtesy and discouraged disrespectful actions, profanity and other language that could harm the employer's image and reputation. Background The employer, Karl Knauz Motors, Inc., which owns several car dealerships in Illinois, issued an employee handbook with a rule that reminded employees of their duty to be courteous to others, stating, “Courtesy is the responsibility of every employee. Everyone is expected to be courteous, polite and friendly to our customers, vendors and suppliers, as well as to their fellow employees. No one should be disrespectful or use profanity or any other language which injures the image or reputation of the Dealership." One of Knauz's employees, Becker, was a salesperson at a Knauz BMW dealership who attended a promotional sales event and posted photos of it on his Facebook page. The sales event was organized by the BMW dealership, and several of the dealership's salespersons voiced criticisms of the inexpensive food that was offered to attendees, including hot dogs and chips. Some of them believed that a better offering should have been made at such an important event. On his Facebook page, Becker posted photos of dealership personnel eating the food at the event, and underneath the photos he posted sarcastic comments that mocked the inexpensive food offered there. Shortly thereafter, at a Land Rover dealership owned by Knauz, a display vehicle was accidentally driven into a nearby pond by the twelve year old son of a customer. Becker posted photos of that episode on Facebook, along with a sarcastic written description of the event.

3 http://mynlrb.nlrb.gov/link/document.aspx/09031d4580ccba21

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Eventually, other Knauz employees posted sarcastic comments underneath Becker's descriptions of both events. When Becker's supervisors learned of these Facebook postings, they questioned Becker about his actions. Becker allegedly showed no remorse for his actions. His supervisors told him that other dealerships saw the postings, which hurt Knauz's image. Knauz terminated Becker for the postings. Knauz later stated, in response to questions from the NLRB's regional office, that Becker was not terminated for the posting about the BMW event. The administrative law judge (ALJ) held that Becker's Facebook posting about the BMW event was protected concerted activity under the NLRA because his criticisms of the food offering were shared by co-workers, and there was a possibility that their criticisms were connected to the dealership's image, which could affect sales. Since lower sales could hurt their commissions, Becker's posting was connected to the terms and conditions of employment. The ALJ also concluded that Becker did not disparage his employer to a degree that removes the NLRA's protections. However, the ALJ held that Becker's Land Rover posting was clearly not protected concerted activity, because it was posted solely by Becker, without discussion with any other employee, and it had no connection to the terms and conditions of employment at Knauz. Most importantly, the ALJ found that Becker was terminated for his Land Rover posting. Finally, the ALJ found that the courtesy rule, as well as a rule prohibiting employees from participating in "unauthorized interviews" and a rule about "outside inquiries concerning employees" were unlawful restrictions on Section 7 activity. However, the ALJ found that a rule discouraging employees from having a bad attitude was lawful. NLRB Board Affirms ALJ: Termination Lawful but Courtesy Rule Unlawful On appeal, the Board issued a decision in Karl Knauz Motors, Inc., affirming the ALJ's holding that Becker was lawfully terminated solely for his Land Rover posting. The Board declined to address the ALJ's conclusions that Becker's Facebook post about the BMW event constituted concerted protected activity, having found that Knauz lawfully terminated Becker for his unprotected conduct. A two-member majority (Member Hayes dissented) held that Knauz's courtesy rule was unlawful because it could be construed as prohibiting employees from discussing and criticizing with other employees their terms and conditions of employment, an activity protected under Section 7 of the NLRA. The majority found that the policy was ambiguous as to whether it prohibited Section 7 activity because it did expressly exempt Section 7 activity from the prohibitions on disrespectful or reputation damaging statements. The majority held that in similar circumstances, it has construed ambiguous employer rules against the employer. 4

4Consistent with the NLRB’s decisions in Costco Wholesale Corp. and Karl Knauz Motors, Inc., a subsequent ALJ decision, citing both cases, found that DISH Network's social media policy improperly banned employees from making "disparaging or defamatory comments about DISH Network." The ALJ further found that the policy's ban on negative electronic activities during "Company time" was unlawful because it failed to convey that negative discussion can occur during breaks and other non-working hours. Dish Network Corp., No. 16-CA-62433, JD (ATL)-30-12, Nov. 14, 2012, Ringler, R, ALJ.

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3. Hispanics United of Buffalo, Inc.5 – Employees Unlawfully Fired for Facebook Posts Criticizing Coworker’s Job Performance

In Hispanics United of Buffalo, Inc., 359 NLRB 37 (2012), the NLRB considered whether employees' off-duty comments on Facebook were protected concerted activity under the NLRA. Specifically, the key litigated issues were whether: • Employees' Facebook posts and comments against a coworker for criticizing their work

performance are protected concerted activity under Section 7 of the NLRA.

• The employer in this case violated Section 8(a)(1) of the NLRA by terminating the employees for their Facebook post and comments to their coworkers which it asserted were harassing and abusive.

Background

Two employees of Hispanics United of Buffalo, Inc., Lydia Cruz-Moore (Cruz) and Marianna Cole-Rivera (Cole) frequently communicated with each other by phone and text message during and after work hours. According to Cole, Cruz often criticized other employees during these conversations who in her view did not adequately serve clients. Other employees testified that Cruz engaged in such criticism. In October 2010, Cruz sent a text message to Cole, stating that she was going to discuss her concerns about employee performance with the Executive Director of Hispanics United. From her personal computer, Cole placed the following post on her Facebook page: "Lydia Cruz, a coworker feels that we don't help our clients enough at [Hispanics United]. I about had it! My fellow coworkers how do u feel?" In response to this statement, four off-duty employees of Hispanics United added comments to Cole's Facebook page, expressing their disagreement with Cruz's opinion of their job performance. Cruz posted a request on Cole's Facebook page that Cole stop lying about her. Cruz complained to the Executive Director about the Facebook comments, and at the Executive Director's request provided her with a printed copy of Cole's Facebook message and the subsequent comments. Shortly thereafter, the Executive Director terminated Cole and the four employees who commented on Cole's Facebook page because their statements constituted bullying and harassment of a coworker, which violated Hispanics United's zero tolerance policy prohibiting such conduct. The Facebook post and comments were the sole reason why the employees were terminated. A complaint was filed alleging that Hispanics United violated Section 8(a)(1) of the NLRA by terminating the employees for engaging in protected concerted activity. An NLRB administrative law judge (ALJ) held that Hispanics United violated Section 8(a)(1), because the employees were punished for engaging in protected concerted activity under Section 7 of the NLRA. The ALJ found a single employee can engage in concerted activity if he seeks to enlist the support of employees in mutual aid and protection. Furthermore, the NLRA protects communications between employees regarding matters affecting their employment, even when: 5 http://mynlrb.nlrb.gov/link/document.aspx/09031d4580e8c5f4

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• There is no ongoing union organizing activity. • The communications do not provide express evidence of an intent to take further

action. • The employees did not bring their concerns to management before termination and

are not attempting to change their working conditions.

The ALJ also found that the employees' communications here were not so reprehensible, under the factors established in Atlantic Steel, 245 NLRB 814 (1979), as to lose the protection of the Act. Finally, the communications did not violate the Hispanics United harassment policy.

NLRB affirms the ALJ

In a decision dated December 14, 2012, the Board issued an opinion in the case, and a three-member majority affirmed the order of the ALJ. Applying Meyers Industries, 76 NLRB 493 (1983), and its progeny, the Board held that the employees engaged in concerted activity when they posted and commented on their work performance on Facebook. Here, Cole told her co-workers about Cruz's assessment of them and solicited their views. By responding with comments of protest on Facebook, the employees made common cause with Cole, thereby meeting the definition of concerted activity. The Facebook post and comments also fit within the definition of concerted activity because they were a first step toward group action to defend themselves against accusations they anticipated. The majority explained that employees need not explicitly state that group action is the purpose of a joint communication for it to be concerted activity. Here, Cole's goal of providing mutual aid by preparing her coworkers for group action was "implicitly manifest" in the circumstances. Therefore, Cole did not have to discuss this goal or tell her coworkers that it was necessary because of Cruz's impending visit with the Executive Director. The Board also held that the Facebook discussion was protected activity under the NLRA, because Section 7 protects employees' job performance discussions. Since the Facebook discussion dealt with allegations of unsatisfactory work, it was protected activity taken for the "employees' mutual aid of each other's defense of those criticisms." Hispanics United argued that it was justified in terminating the employees, regardless of where their conversation took place, because their comments constituted unprotected harassment and bullying of Cruz, in violation of its zero-tolerance policy. The ALJ and the Board rejected this argument because the Facebook communications did not meet the definition of harassment under the employer's policy, but even if they did, Hispanics United must apply its policy with reference to Board law Therefore, Hispanics United could not discipline the employees solely because of their coworker's subjective reaction to the Facebook communications. Because the Facebook post and comments were concerted and protected under the NLRA, Hispanics United violated Section 8(a)(1) of the NLRA when it discharged the employees. The Board found, contrary to the ALJ, that it was unnecessary to analyze the case under Atlantic Steel because Hispanics United claimed that employees' Facebook contacts were never protected and not that they were protected but lost protection because of employee misconduct.

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Hispanics United confirms that the Board takes an expansive view of statements constituting concerted activity, such that:

• employees need not bring group complaints to the attention of management or express an intention to do so to be protected; and

• employees that merely express a similar viewpoint or discuss terms and conditions of employment may be protected because a mutual aid object can be "implicitly manifested" from the surrounding circumstances.

III. NLRB Cases Regarding At-Will Employment Disclaimers Although not decided by the Board itself, two Board proceedings brought by a NLRB regional director raised concern among employers that the NLRB may conclude—for the first time—that at-will employment policies violate employees’ rights to engage in concerted activity to change the policy. American Red Cross, No. 28-CA-23443 (NLRB Feb. 1, 2012) and Hyatt Hotels Corp., No. 28-CA-061114 (NLRB, Feb. 29, 2012). In American Red Cross, an NLRB administrative law judge found that the employer had violated the NLRA by maintaining the following language in a form that employees were required to sign: "I further agree that the at-will employment relationship cannot be amended, modified or altered in any way." The judge concluded that this language effectively required an employee to waive his or her Section 7 rights "to advocate concertedly" and change his or her at-will status. In Hyatt Hotels Corp., the policy language at issue required an individual contract signed by the employee and an executive to alter the employee's at-will status. Both cases settled before they reached the Board. Based on the American Red Cross and Hyatt cases, many employers were concerned that the NLRB's Acting General Counsel would aggressively challenge many forms of at-will employment policies. After much press about American Red Cross and Hyatt Hotels, the NLRB ordered that all at-will cases should be referred to the Division of Advice so the Board’s Acting General can advise on whether they violate Section 7. The Acting General Counsel thereafter issued two advice memos on October 31, 2012: MiMi’s Café, No. 28-CA-084365, and Rocha Transportation, No. 32-CA0086799. Both memos distinguished (but did not disavow) the ALJ’s decision in American Red Cross, and concluded that at-will policies did not violate Section 7.

Mimi’s Cafe

MiMi’s Café had an at-will policy providing: “No representative of the Company has authority to enter into any agreement contrary to the foregoing ‘employment at will’ relationship.” The Acting General Counsel concluded that this policy was distinguishable from the American Red Cross policy because it restricted management, not employees. The American Red Cross policy could not be changed or amended “in any way.” On the other hand, the MiMi’s Café policy does not implicate Section 7 rights because it does “not require employees to refrain from seeking to change their at-will status or to agree that their at-will status cannot be changed in any way. Instead, the provision simply highlights the employer’s policy that its own representatives are not authorized to modify an employee’s at-will status.”

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Rocha Transportation

Rocha Transportation’s policy provided:

Employment with Rocha Transportation is employment at-will. . . . No manager, supervisor, or employee of Rocha Transportation has any authority to enter into an agreement for employment for any specified period of time or to make an agreement for employment other than at-will. Only the president of the Company has the authority to make any such agreement and then only in writing.

The advice memo concluded that this policy could not reasonably be interpreted to restrict Section 7 rights for the same reason as MiMi’s Café: “the provision does not require employees to refrain from seeking to change their at-will status or to agree that their at-will status cannot be changed in any way. Instead, the provision simply highlights the employer’s policy that its own representatives are not authorized to modify an employee’s at-will status.”

As a result of these decisions, it is apparent that the Board concerns itself with at-will policies, but it distinguishes between at-will policies that can never be changed and at-will policies that can only be changed by a designated company representative. Only the former violate Section 7, while the later are typically able to meet an employer’s needs. IV. NLRB Cases on Confidentiality

A. Banner Health System – Blanket Confidentiality of Investigations May Violate Section 7

The employer, Banner Health System, provided its human resources employees with a form to use when interviewing employees as part of an internal investigation. One of the bullet points on the form noted that employees should be told not to discuss ongoing investigations. Although the form was never provided to employees, one human resources manager testified that she frequently, but not always, instructed employees not to discuss the investigation. The Board concluded in July 2012 that Banner Estrella Medical Center violated Section 7 when its HR consultant routinely instructed employees not to discuss matters under investigation while the investigation was ongoing. Banner Health System d/b/a Banner Estrella Medical Center, 358 NLRB 93 (2012)6. The Board held although there can be a justification to prohibit discussion of ongoing investigations, the company must show a “legitimate business justification” that outweighs the employees’ Section 7 rights. A generalized interest in “protecting the integrity of its investigations” is insufficient. Examples of legitimate business justifications include:

• The need to protect witnesses; • The need to prevent the destruction of evidence; • The threat that subsequent testimony may be fabricated; or • The need to prevent a cover up.

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The Board rejected the argument that because there was no discipline for violating the rule, it did not infringe on the employees’ rights. This decision is currently on appeal before the D.C. Circuit. Until that decision, a company should consider whether it can articulate a reason why confidentiality is necessary before it admonishes employees to maintain confidentiality with regard to current investigations.

B. FlexFrac Logistics – Requiring Confidentiality Regarding Broad Company Information Infringes on Section 7 Rights

In Flex Frac Logistics, LLC, 358 NLRB 127 (2012)7, the NLRB adopted the decision of an administrative law judge finding the confidential information provision in Flex Frac’s employment agreement to be unlawful. Flex Frac, a trucking company, had an employment agreement stating that no employee was permitted to share confidential information outside the organization. Confidential information was defined to include:

information that is related to: our customers, suppliers, distributors; [our] organization management and marketing processes, plans and ideas, processes and plans; our financial information, including costs, prices; current and future business plans, our computer and software systems and processes; personnel information and documents, and our logos, and art work.

Flex Frac argued that the rule was proper because it only prohibited disclosure outside the company. The Board held that a rule prohibiting disclosure to anyone outside the company “necessarily prohibits employees from exercising their Section 7 rights to discuss their terms and conditions of employment with union representatives.” The rule was “broadly written with sweeping, non-exhaustive categories that encompass nearly any information related to” the company. Nothing in the rule suggested that “personnel information” excluded wages, and “financial information, including costs” would necessarily include wages. Furthermore, the Board found no legitimate business interest in a rule prohibiting these discussions. The administrative law judge had also found that the charging party – whom Flex Frac had terminated for violating the confidentiality rule after she disclosed the company’s profit margin by revealing its delivery rates as compared to the compensation of its drivers – had been terminated in violation of Section 8 because she was discharged pursuant to the unlawful confidentiality rule. The Board, however, remanded the termination claim clarifying that “for discipline to be unlawful, the employee must have ‘violated the unlawful rule by (1) engaging in protected conduct or (2) engaging in conduct that otherwise implicates the concerns underlying Section 7 of the Act.’” The case is currently on appeal before the Fifth Circuit. In the meantime, an employer might consider reviewing confidentiality provisions to be sure that they are narrowly drafted or contain a clear carve-out for information that may fall under Section 7.

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C. DirecTV U.S. DirecTV Holdings LLC - Employer Restrictions on Contacting Media Invalid

In DirecTV U.S. DirecTV Holdings LLC , 395 NLRB 54 (2013)8, the NLRB held that an employer committed unfair labor practices when it promulgated certain policies restricting employee communications and terminated an employee, purportedly for insubordination, following his vocal support for union representation. Background

DirecTV, a nationwide company that installs satellite dishes, employed an installer of satellite dishes at its facility in Riverside, California. A union filed unfair labor practice (ULP) charges alleging that DirecTV violated the NLRA by terminating the employee for engaging in protected activity. In addition, the charge alleged that DirecTV had a number of provisions in an employee handbook and intranet system that discouraged employees from exercising Section 7 rights. The NLRB administrative law judge (ALJ) found that: DirecTV unlawfully terminated Edmonds in response to his remarks about and advocacy for union representation and that four of the five policy provisions at issue interfered with Section 7 rights. NLRB Invalidates “Do Not Contact Media” Policy On appeal to the NLRB, the Board issued a decision on January 25, 2013 in this case. The Board affirmed the ALJ decision, holding that the four rules at issue were unlawful because employees would reasonably construe them as prohibiting activity protected under Section 7. These included: • A handbook provision instructing employees not to contact the media and a corporate policy

requiring public relations approval for contacting the media, both of which the Board found to violate Section 7's protection of employees' right to communicate about labor disputes with the media.

• A handbook provision instructing employees to contact DirecTV's security department if law enforcement wants to interview or obtain information from a DirecTV employee, which the Board found to violate the NLRA's protection of employees who file unfair labor practice charges or who provide information to the Board in the course of a Board investigation.

• A handbook provision instructing employees to never discuss details about their jobs, company business or work projects with anyone outside the company, which the Board found to violate employees' right to discuss their wages and other terms and conditions of their employment.

• A corporate policy stating that employees may not blog, enter chat rooms, post messages on public websites or otherwise disclose company information that is not otherwise disclosed as a public record, which the Board found, when read in conjunction with the previous provision, to be ambiguous and reasonably read to prohibit disclosure of information about employees' terms and conditions of employment.

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The Board found that “employees would reasonably construe the unequivocal language in the ... rule as prohibiting any and all such protected communications to the media regarding a labor dispute.” The Board pointed out that the company made no effort in the language of the rule to distinguish between acceptable and unacceptable communications to the media. In each case, however, the Board acknowledged that the rules implicated legitimate employer interests, and left open the possibility that more narrowly tailored rules might not be found unlawful. V. Effect of Noel Canning v. NLRB on Recent NLRB Decisions Last year, in early January 2012, President Obama made 3 appointments to the NLRB when the Senate was still on Christmas holiday. In making the appointments, the Administration took the position that the Senate was in recess—thereby making it proper for the President to exercise his right to make recess appointments that are not subject to Senate confirmation. On January 25, 2013, the US Court of Appeals for the District of Columbia Circuit issued an opinion in Noel Canning v. NLRB, No. 12-1115, slip. op. (D.C. Cir. Jan. 25, 2013)9, ruling that President Obama's 2012 recess appointments were invalid because they exceeded the scope of his authority under the Recess Appointments Clause of the US Constitution. The court held that recess appointments may be made only during the "intersession" recess period between each Session of Congress, rather than during breaks occurring throughout each Session of Congress. The Court also held that recess appointments can be made to fill only those positions that arise or become vacant during the recess, and not to fill preexisting or longstanding vacancies. As a result of the court's ruling, the three recess appointments made on January 4, 2012 are invalid and, under the US Supreme Court's decision in New Process Steel, L.P. v. NLRB, 130 S.Ct. 2635 (2010), the Board has lacked a quorum of at least three members since January 4, 2012, and possibly since August 27, 2011, when recess appointee Craig Becker was appointed to replace Board Member Wilma Liebman on the expiration of her term. In the absence of a quorum, the Board may not take any official action, such as issuing orders that must be enforced in court or promulgating new regulations. Therefore, the practical effect for employers whose cases were decided by the Board since at least January 4, 2012 (and possibly as far back as August 27, 2011) is that the Board's decisions are invalid and must be reconsidered and re-decided by a validly reconstituted Board, as occurred following the US Supreme Court's decision in New Process Steel.

Employers must decide whether to follow the legal theories articulated in the decisions issued before and after January 4, 2012 now that the decisions after January 4, 2012 are probably no longer valid. One option is for an employer to argue that those decisions are no longer the law because they were not validly issued and refuse to follow them. On the other hand it likely that (1) unions will continue to file charges articulating the legal theories in the cases decided after January 4, 2012; (2) the Acting General Counsel's Office will enforce the theories of violation

9 http://www.cadc.uscourts.gov/internet/opinions.nsf/D13E4C2A7B33B57A85257AFE00556B29/$file/12-1115-1417096.pdf

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identified in those cases and (3) ALJs will follow those legal theories. Depending on the composition of the new board, it is possible that the new Board, once validly confirmed or appointed, will simply adopt the decisions of its predecessor, as happened in most, but not all, cases after New Process Steel. 14045773.1