Hyundai America Shipping Agency, Inc. v. National Labor Relations Board

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 5, 2013 Decided November 6, 2015

No. 11-1351

HYUNDAI AMERICA SHIPPING AGENCY, INC.,

PETITIONER

v.

NATIONAL LABOR RELATIONS BOARD,

RESPONDENT

Consolidated with 11-1413

On Petition for Review and Cross-Application for

Enforcement of an Order of

the National Labor Relations Board

Thomas A. Lenz argued the cause and filed the briefs for

petitioner.

Heather S. Beard, Attorney, National Labor Relations

Board, argued the cause for respondent. With her on the brief

were John H. Ferguson, Associate General Counsel, Linda

Dreeben, Deputy Associate General Counsel, and Ruth E.

Burdick, Supervisory Attorney.

Before: HENDERSON and GRIFFITH, Circuit Judges, and

WILLIAMS, Senior Circuit Judge.

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Opinion for the Court filed by Senior Circuit Judge

WILLIAMS.

WILLIAMS, Senior Circuit Judge: We review an order of

the National Labor Relations Board invalidating five rules in

the employee handbook maintained by the Hyundai America

Shipping Agency. Though the case was argued in February

2013, we placed it in abeyance the same month, pending the

Supreme Court’s decision in NLRB v. Noel Canning, 134

S. Ct. 2550 (2014). That decision made clear that the three

Board members on the panel in this case were validly

appointed, and in December 2014 we restored the case to the

court’s active docket.

The Board had found that Hyundai’s maintenance of the

five handbook rules violated § 8(a)(1) of the National Labor

Relations Act, which requires that employers not “interfere

with, restrain, or coerce employees in the exercise of” their

rights—enumerated in § 7—to form labor organizations,

bargain collectively, and engage in similar concerted

activities. 29 U.S.C. §§ 157, 158(a)(1). (The Board reversed

two other rule invalidations by the administrative law judge;

these are not at issue and we disregard them in our account of

the Board’s process.)

The case began with a charge by Sandra McCullough, a

former Hyundai employee, alleging that Hyundai fired her

“because she engaged in protected concerted activities,” thus

violating her § 7 rights. Joint Appendix (“J.A.”) 42. This led

to a complaint by the Board’s General Counsel alleging not

only that McCullough’s dismissal violated the NLRA but also

that Hyundai had unlawfully maintained five rules violating

§ 8(a)(1) on their face. The ALJ found that Hyundai would

have fired McCullough regardless of whether she had violated

any of the challenged rules, and the Board affirmed. Hyundai

America Shipping Agency, Inc. & Sandra L. McCullough, 357

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N.L.R.B. No. 80, 2011 WL 4830117, at *2 (August 26, 2011)

(“Order”). So McCullough herself is out of the case. But the

ALJ went on to find that all five rules violated § 7. The Board

affirmed that conclusion as well, and Hyundai appealed.

Our first task is to resolve whether the complaint’s

allegations against the five rules were properly before the

Board. As we’ll explain below, we find that the Board had

jurisdiction over the claims against four rules—ones that the

complaint linked to the dismissal by asserting that Hyundai

discharged McCullough because of her violations of those

rules. Not so as to the fifth; as to it, the Board lacked

jurisdiction because the General Counsel never alleged it to

have played a causal role in the dismissal. As to the four rules

properly before the Board, we enforce the Board’s order as to

three but reverse as to the fourth.

* * *

Jurisdiction. Under 29 U.S.C. § 160(b), the General

Counsel may pursue a charge by issuing a complaint, but the

complaint’s allegations must be “closely related” to that

charge. Drug Plastics & Glass Co. v. NLRB, 44 F.3d 1017,

1021 (D.C. Cir. 1995) (citing Nickles Bakery of Indiana, Inc.,

296 N.L.R.B. 927, 928 (1989)). To decide whether such a

close relationship exists, “the Board looks to whether a

complaint allegation (1) involves the same legal theory as the

charge allegation, (2) arises from the same factual

circumstances or sequence of events as the charge allegation,

and (3) raises similar defenses as the charge allegation.” Id.

Drug Plastics also establishes how to apply the test. There we

adopted the dissenting view of then-Judge Stevens in NLRB v.

Braswell Motor Freight Lines, Inc., 486 F.2d 743 (7th Cir.

1973), and held that “the Board’s jurisdiction should be tested

by the General Counsel’s allegations rather than his proof.”

Id. at 747. Moreover, factual relatedness is evaluated “as of

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the time of the allegations.” Drug Plastics, 44 F.3d at 1020.

In other words, the jurisdictional inquiry is wholly

independent of the General Counsel’s actual success in

proving the alleged relationship.

The Drug Plastics standard is met as to four rules whose

violation the complaint said caused McCullough’s dismissal.

For them, the complaint’s allegations invoked the charge’s

legal theory (that McCullough was fired for exercising her § 7

rights), arose from the same sequence of events (the firing),

and would give rise to similar defenses (most notably, that

Hyundai would have fired McCullough for other reasons had

she not violated the challenged rules). But as to the fifth rule,

relating to information in the company’s personnel files, the

absence of any alleged link to McCullough’s firing is fatal to

any claim of the requisite relationship.

Merits. The four disputed rules that satisfied Drug

Plastics were: (1) a rule prohibiting employees from

discussing matters under investigation by Hyundai

(“investigative confidentiality rule”), Compl. ¶ 4(b), J.A. 44;

(2) a rule limiting the disclosure of information from

Hyundai’s electronic communication and information systems

(“electronic communications rule”), Compl. ¶ 4(d), J.A. 44-

45; (3) a rule prohibiting activities other than work during

working hours (“working hours rule”), Compl. ¶ 4(g), J.A. 46;

and (4) a provision urging employees to make complaints to

their immediate supervisors rather than to fellow employees

(“complaint provision”), Compl. ¶ 4(f), J.A. 45-46.

We address the four in that order. As usual, we accept

the Board’s findings of fact if they are supported by

substantial evidence, 29 U.S.C. § 160(e), and we defer to the

Board’s reasonable interpretations of the National Labor

Relations Act under Chevron, U.S.A., Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837 (1984),

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“which . . . means (within its domain) that a ‘reasonable

agency interpretation prevails.’” Northern Natural Gas Co. v.

FERC, 700 F.3d 11, 14 (D.C. Cir. 2012) (quoting Entergy

Corp. v. Riverkeeper, Inc., 556 U.S. 208, 218 n.4 (2009)).

To decide whether an employer’s rule violates § 8(a)(1),

the Board asks “whether the rule[ ] would reasonably tend to

chill employees in the exercise of their statutory rights.”

Guardsmark v. NLRB, 475 F.3d 369, 374 (D.C. Cir. 2007)

(citations and internal quotation marks omitted). That inquiry

requires the Board to determine, first, whether the rule

restricts § 7 activity explicitly. If the rule does not do so—and

none of these rules does—the Board asks next whether the

rule (1) could be reasonably construed by employees to

restrict § 7 activity, (2) was adopted in response to such

activity, or (3) has been used to restrict such activity. Id. An

affirmative answer to any of these three questions means that

the employer can retain the rule only by showing an adequate

justification.

There is no allegation that Hyundai’s rules were

promulgated in response to protected concerted activity, and

the Board does not suggest that Hyundai applied them to

restrict such activity. Rather, the Board found that the rules

ran afoul of the first of the three tests, i.e., were facially

invalid. The Board’s reasoning is that, even in the absence of

enforcement, “mere maintenance of a rule likely to chill

section 7 activity, whether explicitly or through reasonable

interpretation, can amount to an unfair labor practice.” Id.

(citations and internal quotation marks omitted).

On review, we ask whether the Board reasonably

concluded that “employees would reasonably construe [each

rule] to prohibit Section 7 activity.” Cintas Corp. v. NLRB,

482 F.3d 463, 468 (D.C. Cir. 2007) (citations and internal

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quotation marks omitted). We accept the Board’s conclusions

with respect to all but the employee complaint provision.

Investigative confidentiality rule: The Board found, and

Hyundai does not dispute, that Hyundai maintained an oral

rule prohibiting employees from revealing information about

matters under investigation. Order, 2011 WL 4830117, at

*26. Since this blanket confidentiality rule clearly limited

employees’ § 7 rights to discuss their employment, the

question is whether Hyundai has presented a legitimate and

substantial business justification for the rule, outweighing the

adverse effect on the interests of employees. Desert Palace,

Inc., 336 N.L.R.B. 271, 272 (2001); see also Jeannette Corp.

v. NLRB, 532 F.2d 916, 918 (3d Cir. 1976).

Hyundai argues that federal and state antidiscrimination

statutes and guidelines, which require confidentiality in many

investigations, constitute a legitimate and substantial business

justification for its rule. For example, Equal Employment

Opportunity Commission guidelines suggest that information

about sexual harassment allegations, as well as records related

to investigations of those allegations, should be kept

confidential. Enforcement Guidance on Vicarious Employer

Liability for Unlawful Harassment by Supervisors, § V(C)(1)

(915.002, June 18, 1999), available at

http://www.eeoc.gov/policy/docs/harassment.html. We agree

that the obligation to comply with such guidelines may often

constitute a legitimate business justification for requiring

confidentiality in the context of a particular investigation or

particular types of investigations. But Hyundai has not shown

that these concerns offer a legitimate business reason to ban

discussions of all investigations, including ones unlikely to

present these concerns. The Board therefore reasonably

concluded that the rule was overbroad.

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In enforcing the Board’s order, we need not and do not

endorse the ALJ’s novel view that in order to demonstrate a

legitimate and substantial justification for confidentiality, an

employer must “determine whether in any give [sic]

investigation witnesses need protection, evidence is in danger

of being destroyed, testimony is in danger of being fabricated,

and there is a need to prevent a cover up.” Order, 2011 WL

4830117, at *27. Instead, we simply hold that Hyundai’s

confidentiality rule was so broad and undifferentiated that the

Board reasonably concluded that Hyundai did not present a

legitimate business justification for it.

Electronic communications rule: Hyundai’s employee

handbook included a rule describing limitations on the use of

the company’s electronic communications systems and

concluding with the requirement that “employees should only

disclose information or messages from theses [sic] systems to

authorized persons.” Compl. ¶ 4(d), J.A. 45. The Board held

that a reasonable employee could read this rule to prevent the

sharing of any information exchanged on Hyundai’s electronic

communications network, thereby restricting employees’

ability to share information about the terms and conditions of

employment. We note the somewhat academic nature of the

dispute: both parties agree that the electronic communications

rule cannot legally apply to information about terms and

conditions of employment (absent adequate justification).

There is therefore no substantive dispute over the scope of the

employer’s authority to maintain confidentiality.

We hold that the Board’s conclusion was a reasonable

application of the existing case law. The disposition of this

issue depends largely on whether the electronic

communications rule is more analogous to the policy

challenged in Community Hospitals of Central California v.

NLRB, 335 F.3d 1079 (D.C. Cir. 2003), or to the rule at issue

in Cintas, 482 F.3d at 465, 468-70. In Community Hospitals,

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335 F.3d at 1089, we reversed the Board’s order invalidating a

handbook rule prohibiting “[r]elease or disclosure of

confidential information concerning patients or employees,”

id. at 1088. We concluded that a reasonable employee would

not interpret the rule to ban discussion of the terms of his or

her own employment. In Cintas, 482 F.3d at 468-69, by

contrast, this court enforced the Board’s order invalidating a

policy that protected “the confidentiality of any information

concerning the company,” id. at 465. We distinguished that

policy from the rule in Community Hospitals on the ground

that the latter expressly limited its prohibition to confidential

information. Id. at 470.

Hyundai’s rule, unlike the one we held lawful in

Community Hospitals, is not limited by its terms to

confidential information. A reasonable reader, however,

might interpret the provision to apply only to such

information, just as a reasonable reader of the rule in

Community Hospitals would understand confidential

information to exclude the terms and conditions of his or her

own employment. Community Hospitals, 335 F.3d at 1089.

Since these two cases do not clearly dictate the result in this

case, we defer to the Board’s reasonable conclusion that

Cintas controls and that the electronic communications rule is

invalid.

Working hours rule: Hyundai’s employee handbook

included a rule allowing disciplinary action, including

termination, for “[p]erforming activities other than Company

work during working hours.” Compl. ¶ 4(g), J.A. 46. The

Board invalidated this rule because it prohibited employees

from engaging in union-related activities even during breaks.

We have previously accepted the Board’s distinction between

“working time,” which excludes breaks, and “working hours,”

describing the period from the beginning to the end of a shift,

breaks and all. United Servs. Auto. Ass’n v. NLRB, 387 F.3d

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908, 914 (D.C. Cir. 2004). Restrictions on union activity

during working hours are presumptively invalid; similar

restrictions during working time are not. Id. Applying this

distinction, the Board reasonably concluded that Hyundai’s

rule restricted union activity during a work shift but outside of

working time.

Complaint Provision: Hyundai’s Employee Handbook

included an employee conduct provision:

Voice your complaints directly to your immediate

superior or to Human Resources through our ‘open door’

policy. Complaining to your fellow employees will not

resolve problems. Constructive complaints

communicated through the appropriate channels may help

improve the workplace for all.

Compl. ¶ 4(f), J.A. 45-46. The ALJ concluded that this rule

implicitly prohibited complaints protected by § 7. We

disagree. In Guardsmark, 475 F.3d at 376, we enforced the

Board’s order invalidating a rule banning workplace

complaints because the rule prevented employees from

complaining to customers or to other non-supervisor

employees. In enforcing that order, however, we relied

specifically on the rule’s “mandatory language.” Id; see also

SNE Enters., Inc., 347 N.L.R.B. 472, 492 (2006) (invalidating

anti-complaint rule that led to dismissal of employee); Kinder-

Care Learning Centers, 299 N.L.R.B. 1171 (1990)

(invalidating policy that expressly prohibited complaints to

customers and threatened disciplinary action for

noncompliance).

Here, by contrast, the handbook urges employees to voice

their complaints to their supervisors or to Human Resources,

but the language is neither mandatory nor preclusive of

alternatives: “Constructive complaints communicated through

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the appropriate channels may help improve the workplace for

all” (emphasis added). Moreover, the handbook does not

prescribe penalties for complaints to fellow employees. A

reasonable employee would not read the provision, with its

exhortatory language and lack of penalties, to prohibit

complaints protected by § 7.

* * *

In sum, we enforce the Board’s order with respect to the

investigative confidentiality rule, the working hours rule, and

the electronic communications rule. We grant the petition for

review, and reverse the Board’s order, with respect to the

employee complaint rule and the personnel file rule.

So ordered.