NLRB finds Costco's rule on "defamatory statements" unlawful

On Sept. 7, 2012, the National Labor Relations Board issued its first decision on social media policies. In Costco Wholesale Corporation and United Food and Commercial Workers Union, Local 371, a copy of which is available here, the NLRB determined that Costco violated Section 8(a)(1) of the Act (which prohibits interference with employees exercising their rights to engage in concerted activity) merely by including this rule in its Employee Handbook: Employees should be aware that statements posted electronically (such as [to] online message boards or discussion groups) that damage the Company, defame any individual or damage any person's reputation, or violate the policies outlined in the Costco Employee Agreement, may be subject to discipline, up to and including termination of employment. In the decision appealed to the Board, an Administrative Law Judge found that 'employees would not reasonably construe this rule as regulating, and thereby inhibiting, Section 7 conduct' (which conduct includes engaging in concerted activities for the purpose of collective bargaining or other mutual aid or protection). Rather, said the ALJ, 'employees would reasonably infer that the Respondent's purpose in promulgating the rule was to ensure a 'civil and decent workplace.' The Board reversed that determination. Citing earlier decisions in Lafayette Park Hotel, 326 NLRB 824, enf'd. 203 F.3d 52 (D.C. Cir. 1999). and Lutheran Heritage Village-Livonia, 343 NLRB 646 (2004) the Board stated that whether maintaining a work rule violates the Act depends on whether the rule 'would reasonably tend to chill employees in the exercise of their Section 7 rights.' A rule that explicitly restricts Section 7 rights is unlawful. When a rule does not explicitly prohibit protected activity the violation depends upon showing one of the following: (1) employees would reasonably construe the 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. Costco's rule did not explicitly reference Section 7 activity. Nor was there any evidence that it had been promulgated in response to any union activity. And there was not even a contention made that the rule had been applied to restrict the exercise of employee rights protected by the Act. But in the opinion of the Board, the rule's broad prohibition against making statements that 'damage the Company, defame any individual or damage any person's reputation' could include protected concerted communications protesting Costco's treatment of its employees. Noting that there was nothing in the rule which would suggest that protected communications were excluded from the 'broad parameters' of the rule, the Board therefore ruled that 'employees would reasonably conclude that the rule requires them to refrain from engaging in certain protected communications (i.e., those that are critical of the Respondent or its agents).' As expected, the Board upheld the portion of the Administrative Law Judge's decision holding that merely having the following rules violated 8(a)(1) of the Act: (a) 'unauthorized posting, distribution, removal or alteration of any material on Company property' is prohibited; (b) employees are prohibited from discussing 'private matters of members and other employees . . . includ[ing] topics such as, but not limited to, sick calls, leaves of absence, FMLA call-outs, ADA accommodations, workers' compensation injuries, personal health information, etc.'; (c) '[s]ensitive information such as membership, payroll, confidential financial, credit card numbers, social security number or employee personal health information may not be shared, transmitted, or stored for personal or public use without prior management approval'; and (d) employees are prohibited from sharing 'confidential' information such as employees' names, addresses, telephone numbers, and email addresses. The Board concluded, however, that a rule requiring employees to use 'appropriate business decorum' in communicating with others and a rule prohibiting employees from '[l]eaving Company premises during working shift without permission of management' did not violate the Act. The ruling in Costco follows a series of three Memoranda issued by the Office of the General Counsel, which is the 'enforcement' arm of the National Labor Relations Board. These Memoranda attempt to explain the reasoning for the General Counsel's enforcement activity regarding social media rules. We have previously blogged about these Memoranda here.  

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.

- Jeff Krausman