NLRB Issues Key Changes Regarding Arbitration Agreements, Confidentiality Provisions, and Employee Discipline (US)

The National Labor Relations Board continues to clarify and update employers’ obligations in key areas. As discussed below, one recent decision clarifies when employers may enter into arbitration agreements that require employees to keep the proceedings confidential. Another recent decision rescinded a rule issued by the Obama-era NLRB and clarified, for employers who are negotiating their first contract with a labor union, when the employers may discipline employees.

NLRB Upholds Confidentiality Provision in Arbitration Agreement

The first decision, California Commerce Club, Inc., provides important clarification for all employers. As background, in many situations, the NLRB deems it unlawful for an employer to bar employees from discussing certain terms and conditions of employment. The NLRB takes the position that certain such confidentiality rules can unlawfully restrict employees from engaging in “protected concerted activities,” such as communicating as part of an effort to improve their terms of employment. For example, it is unlawful in most cases for an employer to bar employees from discussing their wages with each other.

In California Commerce Club, the NLRB considered whether an employer could lawfully enter into an arbitration agreement with an employee and then requiring the employee to keep confidential (a) any evidence from an arbitration or (b) any award/decision in the arbitration. In 2016, the NLRB deemed this to be unlawful, holding that it improperly restricted employees from engaging in protected concerted activity. Subsequently, however, the NLRB issued its decision in Boeing Co. (discussed here and here), which changed the standard for determining whether work rules and policies unlawfully restrict protected concerted activities. This caused the NLRB to reconsider the arbitration confidentiality issue.

Ultimately, the NLRB determined that the arbitration confidentiality provision did not violate the NLRA. Notably, the NLRB recognized that this provision would, in some circumstances, restrict employees from engaging in certain protected concerted activities. Ordinarily, under the Boeing test, this would not end the analysis, and the NLRB instead would balance that consideration against the employer’s interests. Here, however, the NLRB recognized that another law governs arbitration agreements (the Federal Arbitration Act), and declined to even apply the Boeing analysis. In doing so, the Board noted that a recent Supreme Court decision (Epic Systems Corp.) gives employers significant authority to enter into arbitration agreements, even if they could restrict protected concerted activities in certain respects.

Thus, the Board deemed it lawful for an employer to maintain this type of narrow arbitration confidentiality provision, and also showed that it will grant employers significantly more leeway with regard to arbitration agreements as distinguished from handbook policies or work rules. Nevertheless, employers should note that the NLRB has changed its approach to confidentiality issues on multiple occasions, and this is an area that the NLRB could revisit in a subsequent presidential administration. Accordingly, if an employer uses arbitration agreements with confidentiality provisions, the employer should continue to monitor for further developments.

NLRB Reinstates Prior Rule for Employers Disciplining Employees Before First CBA

The NLRB also reinstated its prior standard in an important area for employers who are negotiating their first collective bargaining agreement with a labor union. As background, in 2016, the NLRB issued a new rule to govern in this situation. The NLRB held in that prior case that, while an employer is negotiating its first CBA with a union, the employer generally may not discipline an employee unless (a) the employer first notifies the union and (b) if the union requests, bargains in good faith over that discipline.

The NLRB has now overturned this standard. In the recent 800 River Road Operating Company, LLC decision, the NLRB held that an employer may unilaterally discipline an employee while the employer is negotiating its first CBA with a union, so long as the employer is acting consistently with either an established practice or an established discipline policy.

Although this case provides important flexibility to employers, employers should still proceed diligently before disciplining employees in the foregoing situation. Notably, if an employer has not consistently issued the same level of discipline to others who have committed the type of misconduct at issue, that could allow the union to argue that the employer may not act unilaterally.

Further, when an employer is negotiating its first CBA with a union, the union may be particularly sensitive to how the employer is disciplining employees, and more willing to bring other types of claims attempting to challenge that discipline (e.g., claiming that the employer disciplined an employee in retaliation for supporting the union in the prior election campaign). Accordingly, even notwithstanding this new decision, employers should exercise particular care when they are disciplining employees during the negotiation of a first CBA, including by taking steps to ensure they can show the employee committed the charged misconduct and treating the employee consistently with others in the past who were similarly situated.