Duh! Employee Handbook's Arbitration Clause Cannot Be Enforceable If Handbook Explicitly Disclaims Being an Enforceable Contract.

 

Last week, the Hamilton County Court of Appeals reversed an employer’s motion to dismiss and compel arbitration because the arbitration “clause” was contained in an employee handbook, which specifically said that it was not a binding contract and was illusory since the employer could change the terms at any time without the employee’s assent.  Bauer v. River City Mtge., L.L.C., 2023-Ohio-3443. “Because the acknowledgement form disavowed any binding force and provided [the employer] with the authority to amend the employee manual at any time without notice to [the employee], we hold there was no meeting of the minds here. And absent mutual assent, the employee handbook was merely a unilateral statement of rules and policies which did not create any contractual obligation and rights.”

According to the Court’s opinion, the plaintiff employee signed the Handbook Acknowledgement, which explicitly stated that Handbook could be changed at any time at the employer’s discretion without notice and that it was not intended to form an implied or express contract.  One of the policies required employees to arbitrate any dispute with the employer.   The plaintiff filed suit after being fired, claiming that she had been subjected for years to discrimination and sexual harassment.  The employer moved to dismiss and compel arbitration based on the employee handbook.  The trial court dismissed the complaint due to the arbitration policy.

The appellate court reminded the parties that:

As in all contracts, express or implied, both parties must intend to be bound. Absent mutual assent, a handbook becomes merely a unilateral statement of rules and policies which create no obligation and rights.

The Court distinguished prior court decisions where the handbook acknowledgement specifically referenced the arbitration requirement and the employee’s consent to it.  Unlike those cases, the handbook acknowledgement in this case said nothing about mandatory arbitration; on the contrary, it referred only to how the handbook was not an enforceable contract.

Further, the employer’s reservation of rights to unilaterally modify the handbook policies without notice or consent rendered any such contract illusory. “Many courts have ‘found that permitting an employer to unilaterally amend or terminate an arbitration agreement without notice renders the agreement illusory.”’

Defendants rely heavily on Ohio’s strong policy favoring arbitration to argue the employee manual was a binding contract. But this policy is not triggered when a broad disclaimer of contractual obligations indicates the parties never agreed to arbitrate. Further, the presumption in favor of arbitration is useful in resolving ambiguities in the language of an arbitration provision. . . . .But here, no such ambiguities exist, as the acknowledgement form clearly and unequivocally disclaims any contractual obligations. Defendants’ reliance on Ohio’s strong policy favoring arbitration is therefore misplaced.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

NLRB's New General Counsel Rescinds Predecessor's Guidance on Employee Handbooks as Simply Unnecessary.

As expected, the NLRB’s new General Counsel has begun rolling back some of the initiatives pursued by his predecessor.   On Monday, he issued a Memorandum rescinding a number of his predecessor’s initial actions as being inconsistent with the promotion of collective bargaining and protection of employee rights, or as being unnecessary.  Of interest to most employers, he rescinded one of his predecessor’s earliest actions --  a Memorandum explaining how the NLRA applies to employee handbooks.  However, instead of describing this as inconsistent with the NLRA, the NLRB’s General Counsel explained that this Memorandum was simply no longer necessary in light of the number of NLRB decisions since December 2017 that have explained and applied the Boeing decision.  The introductory explanation for this action is stated as follows:

Section 1 of the Act makes clear that the policy of the United States is to encourage the practice and procedure of collective bargaining and to protect the exercise by workers of their full freedom of association, self-organization, and designation of representatives of their own choosing for the purpose of negotiating the terms and conditions of their employment. As a career employee of the NLRB, I have endeavored to effectuate this policy. As Acting General Counsel, I will continue to work to realize the Act’s purpose.

I have determined that a number of outstanding General Counsel Memoranda are either inconsistent with the above-described policies and/or Board law, or are no longer necessary. Accordingly, I am rescinding the following General Counsel Memoranda:

· GC 18-04, Guidance on Handbook Rules Post-Boeing (June 6, 2018) (instructing Regions on the placement of various types of employer rules into the three categories set out in the then-recent Board decision in The Boeing Company, 365 NLRB No. 154 (Dec. 14, 2017)). Note that this Memorandum is being rescinded as it is no longer necessary, given the number of Board cases interpreting Boeing that have since issued.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

NLRB GC Provides Employee Handbook Advice

Last week, the NLRB General Counsel’s office issued a Memorandum to the Regional Offices describing what rules in employer handbooks (or employment agreements) would violate the NLRA.  As prefaced in the Memorandum, “the law does not allow even well intentioned rules that would inhibit employees from engaging in activities protected by the Act.”  Moreover, “the mere maintenance of a work rule may violate Section 8(a)(1) of the Act if the rule has a chilling effect on employees' Section 7 activity.”  Even rules that seem innocuous on their face, were never applied to restrict employee rights under the NLRA, and were not created in response to union or protected concerted activity “will still be found unlawful if . . . employees would reasonably construe the rule's language to prohibit Section 7 activity ” to engage in protected concerted conduct.   As I have discussed here before, the NLRB currently interprets “reasonably construe” in very unreasonable and almost ludicrous ways that no reasonable employee would have imagined.   Indeed, the General Counsel’s Memorandum acknowledges that “the vast majority of violations” found in employee handbooks under of the NLRA concern innocuous and common provisions (relating to confidentiality, professionalism, anti-harassment, trademarks, photography/recording, and media contact, etc.) that the current NLRB “reasonably construes” as prohibiting protected concerted activity under section 7 of the NLRA.   Because of this, the Memorandum compares provisions that have been found unlawful with those that have been found to be lawful and provisions from local employer Wendy’s International that the General Counsel believed were unlawful and were recently modified to settle an unfair labor practice charge.  

Confidentiality.  Rules have been found unlawful when they specifically required an employee to maintain the confidentiality of all information (including, but not limited to, wages, promotions, disciplinary actions, grievances, complaints, etc.) relating to other employees because employees have the section 7 right to discuss their terms and conditions of employment with each other and others (such as union officials and the media).  With this in mind, any rule or provision which requires employees to not discuss or disclose information relating to other employees will likely be found unlawful.  Moreover, even without specifically mentioning personnel information, the following rules were found to be unlawful because they could be “reasonably construed” to prohibit the disclosure of personnel information: 

·        Prohibiting employees from "[d]isclosing ... details about the [Employer]."

·        "Sharing of [overheard conversations at the work site] with your coworkers, the public, or anyone outside of your immediate work group is strictly prohibited."

·        "Discuss work matters only with other [Employer] employees who have a specific business reason to know or have access to such information.. .. Do not discuss work matters in public places."

·        "[I]f something is not public information, you must not share it."

·        Confidential Information is: "All information in which its [sic] loss, undue use or unauthorized disclosure could adversely affect the [Employer's] interests, image and reputation or compromise personal and private information of its members."

In contrast, the NLRB found the following rules to be lawful:  

·        No unauthorized disclosure of "business 'secrets' or other confidential information."

·        "Misuse or unauthorized disclosure of confidential information not otherwise available to persons or firms outside [Employer] is cause for disciplinary action, including termination."

·        "Do not disclose confidential financial data, or other non-public proprietary company information. Do not share confidential information regarding  business partners, vendors or customers."

·        Prohibition on disclosure of all "information acquired in the course of one's work"  (when this rule was located among rules relating to conflicts of interest, SEC compliance and other federal and state laws).

Inappropriate, Disrespectful or Defamatory Conduct.  Rules that prohibit staff from engaging in "disrespectful," "negative," “defamatory,” "inappropriate," or "rude" conduct towards the employer or management, or even making false statements, absent sufficient clarification or context, will generally be found unlawful.  In contrast, rules which require courteous, cooperative and respectful behavior towards only staff, customers and competitors are lawful.  The Memorandum explains that “employers have a legitimate business interest in having employees act professionally and courteously in their dealings with coworkers, customers, employer business partners, and other third parties, ” but apparently do not have a similar interest in similarly protecting the mental health and feelings of management employees.   

 While employers can ban insubordination, the rule may be unlawful if “insubordination” is defined or explained to include protected conduct, such as disrespect, etc.   In contrast, a rule banning insubordination which places it in context of serious misconduct, such as threatening, intimidation or assaults, will be upheld. While employers cannot ban defamatory, false or publicly derogatory statements about the employer, it can ban maliciously false statements or statements about the employers’ products (vs. the employer’s labor policies or working conditions).  With this in mind, the Memorandum endorses the following rules:  

·        "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."  

·        "Being insubordinate, threatening, intimidating, disrespectful or assaulting a manager/supervisor, coworker, customer or vendor will result in" discipline.

The NLRA also gives employees the right “to argue and debate with each other about unions, management, and their terms and conditions of employment. These discussions can become contentious, but as the Supreme Court has noted, protected concerted speech will not lose its protection even if it includes ‘intemperate, abusive and inaccurate statements.’"  Therefore, anti-harassment rules cannot also ban protected vigorous debate under the NLRA.  Similarly, rules which have banned insulting, derogatory, embarrassing, hurtful or offensive comments (including those aimed at company employees, which can include management) or about politics (which can include right-to-work laws) are unlawful.  For instance, the following rules were found to violate the NLRA:  

• "Material that is fraudulent, harassing, embarrassing, sexually explicit, profane, obscene, intimidating, defamatory, or otherwise unlawful or inappropriate may not be sent by e-mail. . . ."

• Do not send "unwanted, offensive, or inappropriate" e-mails.

• "[D]on't pick fights" online.

Supposedly applying the same logic, the NLRB found the following rules to be lawful:

·        "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."

·        "[T]hreatening, 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."

Finally, employees have the right to seek public support in their disputes against their employer. “While employers may lawfully control who makes official statements for the company, they must be careful to ensure that their rules would not reasonably  be read to ban employees from speaking to the media or other third parties on their own (or other employees') behalf.”  Under this logic, the NLRB has prohibited the following rules: 

• Employees are not "authorized to speak to any representatives of the print and/or electronic media about company matters" unless designated to do so by HR, and must refer all media inquiries to the company media hotline.

• "[A]ssociates are not authorized to answer questions from the news media. .. . When approached for information, you should refer the person to [the Employer's] Media Relations Department."  

·        "If you are contacted by any government agency you should contact the Law Department immediately for assistance."

That being said, the NLRB has been satisfied with the following rules when placed in context:

·        "The company strives to anticipate and manage crisis situations in order to reduce disruption to our employees and to maintain our reputation as a high quality company. To best serve these objectives, the company will respond to the news media in a timely and professional manner only through the designated spokespersons."

• "Events may occur at our stores that will draw immediate attention from the news media. It is imperative that one person speaks for the Company to deliver an appropriate message and to avoid giving misinformation in any media inquiry. While reporters frequently shop as customers and may ask questions about a matter, good reporters identify themselves prior to asking questions. Every . . . employee is expected to adhere to the following media policy: . .. 2. Answer all media/reporter questions like this: 'I am not authorized to comment for [the Employer] (or I don't have the information you want). Let me have our public affairs office contact you."

Employers also cannot preclude employee “fair use” of company trademarks and logos on their picket signs, leaflets, and other protest materials, etc.  The Board has extended this rule to preclude rules prohibiting use of other non-employer trademarks and logos and using the employer’s name in facebook and other social media posts.  These rules are often created to prevent violation of copyright infringement and unfair competition.   That being said, the Board has approved provisions encouraging employees to respect copyright and other intellectual property laws.

Photographs and Videos.

Employees also have a Section 7 right to photograph and make recordings in furtherance of their protected concerted activity, including the right to use personal devices to take such pictures and recordings. . . . Thus, rules placing a total ban on such photography or recordings, or banning the use or possession of personal cameras or recording devices, are unlawfully overbroad where they would reasonably be read to prohibit the taking of pictures or recordings on non-work time.

With this in mind, the Board has banned a rule prohibiting employees “from  wearing cell phones, making personal calls or viewing or sending texts ‘while on duty.’"  The Memorandum indicates that bans of news media cameras are lawful and that medical employers may prohibit photographing of patients.  

Last year, the Board settled with Wendy’s over certain provisions of its employee handbook, including the following:

·        Making the employee handbook itself confidential and prohibiting its disclosure and duplication.

·        Prohibiting employees from commenting about the Company's business, policies, or employees without authorization, particularly when it might reflect negatively on the Company.

·       Prohibiting employees from emailing, posting, commenting or blogging anonymously.

·        Warning employees “to avoid any conflict between your personal interests and those of the Company. A conflict of interest occurs when our personal interests interfere—or appear to interfere—with our ability to make sound business decisions on behalf of Wendy's.”

 

The Memorandum then contains new language used by Wendy’s which complies with the NLRA.

 

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

NLRB Suggests Employee Handbook Language Concerning Confidentiality of Workplace Investigation

Faithful readers may recall that last August, the NRLB found that an employer violated §7 of the NLRA by directing employee-witnesses to maintain the confidentiality of their interviews during the pendency of a workplace investigation.   Then, at the end of January, the NLRB issued an “Advice Memorandum” concerning Verso Paper which found that an employer’s employee handbook provision was unlawful under the NLRA, but suggested revisions which would bring it into compliance.  (Rumor has it that the Memorandum may have been issued in January, but was not published until recently).    The Memorandum was issued by the NLRB’s Division of Advice (which advises the Board’s regional offices about proceeding with administrative proceedings and whose opinion does not carry as much weight as a Board or court decision).  The Division found the last two sentences of the following employee handbook to be overbroad: 

 Verso has a compelling interest in protecting the integrity of its investigations. In every investigation, Verso has a strong desire to protect witnesses from harassment, intimidation and retaliation, to keep evidence from being destroyed, to ensure that testimony is not fabricated, and to prevent a cover-up.

To assist Verso in achieving these objectives, we must maintain the investigation and our role in it in strict confidence. If we do not maintain such confidentiality, we may be subject to disciplinary action up to and including immediate termination.

The Division found this “blanket rule” did not demonstrate a particularized need for confidentiality on a case-by-case basis as required by the NLRB.   Accordingly, the Division recommended that the regional office proceed to issue a complaint against the employer unless the parties were able to settle the dispute.  Nonetheless, the Division also concluded that the employee handbook policy could be lawful if the employer revised it to replace the last two sentences with the following language:

Verso may decide in some circumstances that in order to achieve these objectives, we must maintain the investigation and our role in it in strict confidence. If Verso reasonably imposes such a requirement and we do not maintain such confidentiality, we may be subject to disciplinary action up to and including immediate termination.  

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.