Category: Audits/Due Diligence

This post is the fourth in a series providing guidance on federal rules regarding permissible and impermissible employer handbook policies and rules. See Guidance Regarding Confidentiality Rules, found here and regarding Employee Conduct Rules, found here and regarding Rules Related to Company Logos, Copyright, and Trademark.   While the recent guidance was issued by the National Labor Relations Board (NLRB) (view the full Memorandum here), this guidance is applicable to both unionized and non-unionized employers. The National Labor Relations Act (NLRA) restricts all employers from issuing policies or rules – even if well-intentioned – that inhibit employees from engaging in activities protected by the act, such as discussing wages, criticizing management, publicly communicating about working conditions and discussing unionization.

When Do Restrictions on Photography and Recording Go Too Far?

When it comes to rules restricting an employee’s ability to take photographs or make recordings, the NLRB recognizes that employers have legitimate interests, such as maintaining the confidentiality of business records and protecting the privacy of employees and customers. However, those interests must be balanced against employees’ rights under Section 7 of the NLRA to take photographs or make recordings in furtherance of protected concerted activity, such as documenting unfair labor practices or health and safety violations. Accordingly, the key when drafting or reviewing such policies is to ensure they are sufficiently limited in scope and could not reasonably be read to prohibit taking pictures or making recordings on non-work time.

While context always matters, a few key guidelines emerge from the NLRB report:

•  DO NOT impose a broad ban on use of recording devices on employer property.

•   DO NOT impose a broad ban on use or possession of personal electronic devices, such as cell phones, computers, or data storage devices.

•  DO NOT prohibit employees from using personal electronic equipment “while on duty,” as this could be interpreted to restrict such use during rest and meal breaks occurring during an employee’s shift.

Finding a Policy That Protects Employers’ Interests and Section 7 Rights

The NLRB has provided one example of a policy that strikes the right balance:

•  “Due to the potential for issues such as invasion of privacy (employee and customer), sexual or other harassment (as defined by our harassment/discrimination policy), [and] protection of proprietary [information, employees] may not take, distribute, or post pictures, videos, or audio recordings while on working time. [Employees] also may not take pictures or make recordings of work areas. An exception to the rule concerning pictures and recordings of work areas would be to engage in activities protected by the National Labor Relations Act including, for example, taking pictures of health, safety and/or working condition concerns or of strike, protest and work-related issues and/or other protected concerted activities.”

This policy was found to be narrowly tailored enough to protect employees’ Section 7 rights while still addressing the legitimate interests of the employer.

As always, it is important to remember that context matters when evaluating employer policies, handbooks, and rules. For instance, the NLRB has found that a no-photography rule instituted in response to a breach of patient privacy at an employer with a well-understood and strong privacy interest did not infringe on employees’ Section 7 rights because it would not be reasonably understood to limit taking pictures for protected concerted purposes. See Flagstaff Medical Center, 357 NLRB No. 65, slip op. at 5 (Aug. 26, 2011), enforced in relevant part, 715 F.3d 928 (D.C. Cir. 2013). Therefore, be sure to consider the particular circumstances of the employer and how employees could reasonably interpret policies restricting photography and recording when reviewing policies of this nature.

This post is the third in a series providing guidance on federal rules regarding permissible and impermissible employer handbook policies and rules. See Guidance Regarding Confidentiality Rules here and regarding Employee Conduct Rules here. While the recent guidance was issued by the National Labor Relations Board (NLRB) found here, this guidance is applicable to both unionized and non-unionized employers. The National Labor Relations Act (NLRA) restricts all employers from issuing policies or rules – even if well-intentioned – that inhibit employees from engaging in activities protected by the act, such as discussing wages, criticizing management, publicly communicating about working conditions and discussing unionization.

“Use” Logos, Copyrights and Trademarks – Fair or Unfair?

The NLRB recognizes that employers have a right to protect their intellectual property, including logos, copyright and trademarks. However, that protection can only go so far. Specifically, the NLRB has determined that employees are allowed “fair use” for non-commercial purposes such as on picket signs, leaflets and other protest material. In establishing this rule, the NLRB has reasoned that employer’s proprietary interests are not implicated by employees’ use of the names, logos or trademarks when engaging in collective action under Section 7 of the NLRA.   As such, a broad ban on use of company logos, copyrights or trademarks impinges on “fair use” and will be viewed with disfavor by the NLRB.

As has been repeated in prior posts, context always matters when evaluating employer policies, rules and handbooks. However, there are a few clear guidelines for employers when reviewing language as to use of logos, copyrights and trademarks:

• DO NOT impose a broad ban on any use of company logos, trademarks, graphics, or advertising materials in social media or otherwise.

• DO NOT impose a vague ban on use of “other people’s property,” such as trademarks “without permission.”

• DO NOT prohibit use of the employer’s name, logo or trademark. This impinges on employee’s right to work together, collectively, and organize.

• DO require employees to respect laws, permitting fair use.

Examples of Policies That Protect Intellectual Property While Permitting “Fair Use”

The NLRB has provided two examples of policies that strike the right balance. Employers should consider whether there provisions satisfy their concerns with protection of intellectual property and find ways to adjust, if necessary, to also allow employees’ fair use.

• “Respect all copyright and other intellectual property laws. For [the Employer’s] protection as well as your own, it is critical that you show proper respect for the laws governing copyright, fair use of copyrighted material owned by others, trademarks and other intellectual property, including [the Employer’s] own copyrights, trademarks and brands.”

• “DO respect the laws regarding copyrights, trademarks, rights of publicity and other third-party rights. To minimize the risk of a copyright violation, you should provide references to the source(s) of information you use and accurately cite copyrighted works you identify in your online communications. DO not infringe on [Employer] logos, brand names, taglines, slogans, or other trademarks.”

These examples strike the right balance because they do not impose a strict ban on intellectual property. Rather, they remind employees of applicable law and provide guidance on how others’ intellectual property may be used property and lawfully.

This post is the second in a series providing guidance on federal rules regarding permissible and impermissible employer handbook policies and rules. See Guidance Regarding Confidentiality Rules, here. While the recent guidance was issued by the National Labor Relations Board (NLRB) found here, this guidance is applicable to both unionized and non-unionized employers. The National Labor Relations Act (NLRA) restricts all employers from issuing policies or rules – even if well-intentioned – that inhibit employees from engaging in activities protected by the act, such as discussing wages, criticizing management, publicly communicating about working conditions and discussing unionization.

Employee Conduct Rules: What Is At Stake?

The NLRB acknowledges that employers have a right to prohibit employee insubordination. Equally important, employers have a right and an obligation to ensure that their workplace is free from harassment. However, these employer rights and legitimate business interests must not be expressed in rules that also curtail employees’ rights to (1) criticize or protest their employer’s labor policies or treatment of employees; or (2) argue and debate with each other about unions, management and their terms and conditions of employment. The NLRB places a high premium on these employee rights, so much so that even false and defamatory statements regarding employers is permitted (provided they are not malicious) and that speech among employees may even be “intemperate, abusive and inaccurate,” and still be protected.

While context always matters, there are a few clear guidelines:

• DO NOT demand that employees “respect” all employees and management. A broad rule such as this,   without any context or examples, will be deemed unlawful.

• DO NOT insist that employees refrain from conduct that could “damage the company’s reputation;” however, prohibiting disparagement of an employer’s product is permissible.

• DO require employees to cooperate with each other in the workplace.

• DO NOT prohibit employees from debating honestly with each other.

The NLRB not only disfavors policies and rules that expressly prohibit or restrict employee discussions and collective action, but also those that are vague enough to dissuade an employee from such activities. According to the NLRB, employees should not have to guess about whether they are allowed to talk about their pay, hours or working conditions, but should instead feel free to do so.

When Do Employee Conduct Rules Strike The Right Balance?

Employers can clearly prohibit insubordination and harassment; however, such rules must still be clearly tailored to avoid scrutiny from the NLRB.   Some examples of employee conduct policies that the NLRB has deemed lawful include:

• No “rudeness or unprofessional behavior towards a customer, or anyone in contact with” the company.

• “Employees will not be discourteous or disrespectful to a customer or any member of the public while in the course and scope of [company] business.”

• “Each employee is expected to work in a cooperative manner with management/ supervision, coworkers, customers and vendors.”

• “Each employee is expected to abide by Company policies and to cooperate fully in any investigation that the Company may undertake.”

Further, as to employees’ conduct towards each other, the NLRB approved of the following policies:

• No “making inappropriate gestures, including visual staring.”

• Any logos or graphics worn by employees “must not reflect any form of violent, discriminatory, abusive, offensive, demeaning, or otherwise unprofessional message.”

• No “threatening, intimidating, coercing, or otherwise interfering with the job performance of fellow employees or visitors.”

• No “harassment of employees, patients or facility visitors.”

• No “use of racial slurs, derogatory comments, or insults.”

Perhaps the most important takeaway when reviewing company policies is that context matters. Illustrative of this point, the NLRB upheld a rule that prohibited, among other things, “being disrespectful” because it was clear based on the context that the provision was focused on serious misconduct, i.e., being insubordinate, threatening, intimidating or assaulting others in the workplace. A rule with examples of what constitutes “disrespect” will not unlawfully cause workers to refrain from any spirited debate or discussion regarding working conditions.

When reviewing policies intended to ensure a safe, productive and harassment-free workplace, employers must consider if rules impede employee rights to discuss, criticize and debate. Broad rules requiring constant “civility” and “respect” run the risk of prohibiting collective action and will be reviewed with disfavor by the NLRB.

On April 1, 2015, the SEC announced a settled enforcement proceeding against KBR, Inc., a publicly traded, Houston-based technology and engineering company, for including “restrictive language” in confidentiality agreements used in the course of internal investigations. This is the first time the SEC has used its enforcement powers under Rule 21F-17 of the Whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Rule 21F-17 provides that “[n]o person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement … with respect to such communication.”

The language to which the SEC took exception appeared in confidentiality agreements KBR used in connection with internal investigations. The statement, which investigators required employees to sign before the interview, was included in the Company’s Code of Business Conduct Investigations Procedures manual. The statement read:

I understand that in order to protect the integrity of this review, I am prohibited from discussing any particulars regarding this interview and the subject matter discussed during this interview, without the prior authorization of the Law Department. I understand that the unauthorized disclosure of information may be the grounds for disciplinary action up to and including termination of employment.

It does not appear that the policy specifically referenced reporting to the SEC or any governmental authority. Moreover, it seems likely that the Company’s intent was to prevent employees from discussing the matter with each other. The SEC admitted that it had no evidence KBR ever prevented an employee from communication with the SEC staff or that KBR took any action to enforce the confidentiality provision. Nevertheless, the SEC posited that the language undermined the purpose of Section 21F and Rule 21F-17(a), which is to “encourage individuals to report to the” SEC.

The SEC indicated its approval of KBR’s amended policy by quoting it in the Order. The new policy provides:

Nothing in this Confidentiality Statement prohibits me from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. I do not need the prior authorization of the Law Department to make any such reports or disclosures and I am not required to notify the company that I have made such reports or disclosures.

While the Order imposes a modest civil penalty of $130,000, KBR is also required to contact KBR employees who signed confidentiality statements from August 21, 2011, to the present and to provide them with a copy of the Order and a statement that they do not need permission from KBR to communicate with any governmental entity.

This case of first impression underscores the SEC’s commitment to the Whistleblower program and its intent to punish employers that, intentionally or not, restrict an employee’s ability to report potential violations to the SEC. There has been much press about such restrictive language in employment agreements, not just related to the SEC, but also related to the National Labor Relations Board and other federal agencies. It is clear the SEC will consider such restrictive language wherever it may be found. By virtue of this Order, companies will have to manage protecting the integrity of internal investigations and avoiding accusations that it discouraged employees from going to the SEC. It also remains to be seen whether the SEC will take the position that companies are required to affirmatively inform employees of their ability to make reports to the SEC or other governmental bodies or whether employees must merely refrain from discouraging such activity. Because the Whistleblower provisions apply to both private and public companies, it seems a prudent course of action for all employers to review employment and confidentiality agreements.