Court Upholds Confidentiality Clauses for Workplace Investigations

Court Upholds Confidentiality Clauses for Workplace Investigations

A recent National Labor Relations Board (NLRB) decision overturns precedent to allow employers to place confidentiality clauses regarding workplace investigations in their employee handbooks. In Apogee Retail LLC d/b/a Unique Thrift Store and Kathy Johnson, 368 NLRB No. 144 (2019), the board ruled in favor of an employer that has two clauses in its employee handbooks that create policy to require employees to maintain confidentiality during ongoing workplace investigations.

The ruling overturns Banner Estrella Medical Center, 362 NLRB 1108 (2015), which set forth a practice of case-by-case evaluation of whether an employer’s confidentiality rules are acceptable. As Banner Estrella makes clear, confidentiality rules can run afoul of the rights of employees under Section 7 of the National Labor Relations Act (NLRA) to discuss working conditions, including disciplinary actions. However, in Apogee Retail the court applied the test for “facially neutral workplace rules established in Boeing Co., 365 NLRB No. 154 (2017).” That test establishes a standard, discussed below, for confidentiality requirements.

Relief for Employers

The new ruling in Apogee Retail should provide employers with some relief in that now their confidentiality requirements in their handbooks will not necessarily be subject to case-by-case review. Instead, a facially neutral policy enforcing confidentiality in ongoing investigations is likely to be accepted. A “facially neutral” clause is one that clearly (or “on its face”) applies equally to employees and does not prejudice their right to discuss workplace conditions. While a legal professional should be consulted regarding the precise wording of confidentiality clauses, the Apogee Retail decision does quote the relevant passages in that employer’s handbooks. One sentence under a header and paragraph regarding reporting illegal or unethical behavior reads: “Reporting persons and those who are interviewed are expected to maintain confidentiality regarding these investigations.” Another sentence from the business’s loss prevention policy saying that employees could be disciplined or fired for refusing to cooperate with investigations includes “unauthorized discussion of investigation or interview” with fellow employees as a cause for discipline or dismissal.

Careful with Those Clauses

This case may be compared to Banner Health System v. NLRB (2017), in which an employer’s confidentiality clauses were found to be too broad. In that case, according to Wolters Kluwer, the confidentiality clause in question prohibited discussion of “private employee information (such as salaries, disciplinary action, etc.) that is not shared by the employee.” This was ruled as overbroad and infringing on the Section 7 rights of employees to discuss their working conditions.

It should be noted, however, that Banner Health System upheld the confidentiality clause pertaining to workplace investigations. Banner Health maintained a “categorical non-disclosure rule” regarding investigations. So even Banner Health System can be cited in favor of clauses in employee handbooks requiring confidentiality among employees regarding ongoing workplace investigations.

Boeing

The Boeing case did not concern workplace investigations but did touch upon an employer’s rule affecting the rights of workers to discuss working conditions. Specifically, Boeing had a no-camera rule in its workplace. According to an NLRB press release, the “Board concluded that Boeing lawfully maintained a no-camera rule that prohibited employees from using camera-enabled devices to capture images or video without a valid business need and an approved camera permit.” Further, “The Board majority reasoned that the rule potentially affected the exercise of NLRA rights, but that the impact was comparatively slight and outweighed by important justifications, including national security concerns.”

The Boeing case also established three categories of confidentiality rules. They are quoted as:

  • Category 1 will include rules that the Board designates as lawful to maintain, either because (i) the rule, when reasonably interpreted, does not prohibit or interfere with the exercise of NLRA rights; or (ii) the potential adverse impact on protected rights is outweighed by justifications associated with the rule.
  • Category 2 will include rules that warrant individualized scrutiny in each case as to whether the rule would prohibit or interfere with NLRA rights, and if so, whether any adverse impact on NLRA-protected conduct is outweighed by legitimate justifications.
  • Category 3 will include rules that the Board will designate as unlawful to maintain because they would prohibit or limit NLRA-protected conduct, and the adverse impact on NLRA rights is not outweighed by justifications associated with the rule. An example would be a rule that prohibits employees from discussing wages or benefits with one another.”

It is worth noting that in both the Boeing case and Banner Health System, a prohibition of discussion of wages was found to be an overly broad application of a confidentiality rule. While confidentiality may be required regarding an open workplace investigation, it cannot be required for discussion of wages.

Reasons for Confidentiality Requirements

Apogee Retail listed several reasons to support its confidentiality requirement. Among them was this reason, which applies specifically to the retail business: “The retail industry experiences billions of dollars in theft each year. A significant portion of that theft involves various types of employee theft requiring diligent and effective investigations.” Just as Boeing was found to have a legitimate reason–national security–for its no-camera rule, Apogee Retail had its reasons for requiring confidentiality in investigations. Confidentiality protects those under investigation from rumor and innuendo. Another reason that Apogee Retail provided for its confidentiality rule was that the rule allowed “a company better controls to create and sustain stronger safe harbors for employees when reporting serious issues that require an investigation[] is necessary; prohibiting the employer from requiring confidentiality hampers effective and thorough investigations.” Further, “Employees interviewed during investigations almost always ask for confidentiality.” For these reasons, the board ruled in favor of Apogee Retail and its rules requiring confidentiality regarding open workplace investigations.

One question that remains–and that likely will continue to be addressed on a case-by-case basis–is whether confidentiality rules are enforceable once an investigation has concluded. Employers may run afoul of Section 7 protections if they require confidentiality once an investigation has ended. And employers may have good reason to release the results of an investigation if, for example, it concerned a safety violation. For this reason, it is in the best interest of an employer to consult with a knowledgeable professional when crafting confidentiality provisions.

Conclusion

The NLRB’s recent decision in Apogee Retail confirms the board’s commitment to allowing facially neutral confidentiality provisions in employee handbooks and creates a safe harbor for employers. While employers have sometimes gone too far with confidentiality provisions, they are unlikely to run afoul of the law if they have compelling reasons for their confidentiality rules and do not interfere with the general right of employees to discuss working conditions.

About The Author

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Eric Howard is a legal editor who lives in Los Angeles.

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