Banner Health System v. National Labor Relations Board

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 6, 2017 Decided March 24, 2017

No. 15-1245

BANNER HEALTH SYSTEM, DOING BUSINESS AS BANNER

ESTRELLA MEDICAL CENTER,

PETITIONER

v.

NATIONAL LABOR RELATIONS BOARD,

RESPONDENT

Consolidated with 15-1309

On Petition for Review and Cross-Application

for Enforcement of an Order of

the National Labor Relations Board

Mark G. Kisicki argued the cause for petitioner. With him

on the briefs was Elizabeth M. Townsend.

Maurice Baskin and Elizabeth Parry were on the joint

brief for amici curiae for American Hotel & Lodging

Association, et al. in support of petitioner.

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Allyson N. Ho, John C. Sullivan, and Judd E. Stone were

on the brief for amicus curiae Association of Corporate

Counsel in support of petitioner.

Joel A. Heller, Attorney, National Labor Relations Board,

argued the cause for respondent. With him on the brief were

Richard F. Griffin, Jr., General Counsel, John H. Ferguson,

Associate General Counsel, Linda Dreeben, Deputy Associate

General Counsel, and Usha Dheenan, Supervisory Attorney.

Before: PILLARD, Circuit Judge, and EDWARDS and

SILBERMAN, Senior Circuit Judges.

Opinion for the Court filed by Circuit Judge PILLARD.

PILLARD, Circuit Judge: This case requires us to decide

whether an employer’s effort to keep certain information

confidential ran afoul of its employees’ established rights under

federal labor law to share employment-related information

with one another in an effort to improve their lot. The National

Labor Relations Board concluded that petitioner Banner

Health’s Confidentiality Agreement unlawfully barred its

workers from sharing information at the heart of labor law’s

concern: information about salaries and employee discipline.

The Board also determined that Banner unlawfully maintained

a categorical policy of asking employees not to discuss certain

kinds of human resources investigations. Such investigative

nondisclosure policies, the Board held, may only be applied on

a case-by-case basis following a threshold determination that

confidentiality is necessary to the particular investigation.

The Board’s invalidation of the Confidentiality Agreement

was reasonable and supported by substantial evidence, and we

therefore grant the application for enforcement on that issue.

But, because the record lacks substantial evidence that Banner

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actually maintained a categorical investigative nondisclosure

policy, we grant the petition for review and deny enforcement

as to that portion of the Board’s Order.

I. Background

Banner Health is a large, nonprofit healthcare system that

includes Banner Estrella Medical Center in Phoenix, AZ.

James Navarro worked at Banner Estrella sterilizing surgical

equipment. On February 19, 2011, Navarro learned that he

could not use the autoclave—a large, pressurized steam

sterilizer normally used for sterilizing reusable medical

instruments—because the hospital’s steampipe needed to be

fixed. He was instructed to use hot water from the coffee

machine in the break room for the first step in the cleaning

process, and then to use a low-temperature sterilizer with

hydrogen peroxide. Navarro was concerned that those

procedures violated established protocol. He raised questions

with various supervisors and did some quick research that did

not allay his concerns. After confirming there were adequate

clean instruments available for the day’s scheduled surgeries

and deliveries, Navarro did not sterilize additional instruments.

His supervisor was not pleased. A couple of days later,

Navarro visited Banner’s human resources consultant, JoAnn

Odell, reporting his discomfort with the prescribed procedures

and expressing concern for his job. That afternoon, Navarro’s

supervisor gave him a “nondisciplinary coaching” and, a few

days later, a negative yearly evaluation.

Navarro filed an unfair labor practice charge with the

Board, prompting the Board’s Regional Director to file a

retaliation complaint against Banner. Based on documents

unearthed during discovery, the Regional Director amended the

complaint to include claims that Banner (1) made employees

sign an overbroad Confidentiality Agreement and (2)

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maintained an overbroad rule requiring nondisclosure of

investigative interviews.

The main evidence supporting the first claim was the

Confidentiality Agreement itself. The Agreement defined

“confidential information” to include, as relevant here,

“[p]rivate employee information (such as salaries, disciplinary

action, etc.) that is not shared by the employee.” J.A. 86. The

Agreement further stated that “[k]eeping this kind of

information private and confidential is so important that if I fail

to do so, I understand that I could be subject to corrective

action, including termination and possibly legal action.” Id.

According to Odell, all new Banner hires were required to sign

this Agreement.

The primary evidence in support of the charge that Banner

maintained an overbroad investigative nondisclosure policy

was an “Interview of Complainant” form that Odell referred to

during her interview of Navarro. That document contained

prepared statements and questions for human resources

interviewers to read, along with space for notes. It opened with

an “Introduction for all interviews,” part of which stated: “I

ask you not to discuss this with your coworkers while this

investigation is going on, for this reason, when people are

talking it is difficult to do a fair investigation and separate facts

from rumors.” J.A. 81. The only other relevant evidence came

from Odell’s rather general and ambiguous testimony about

how the interview form was used. Odell testified that Banner

employees were never given a copy of that form and that she

“request[ed]” nondisclosure “[h]alf a dozen [times], maybe” in

her 13 months at Banner, and only “in the more sensitive

situations.” See Tr. 186, 193-96, 258-60. She said that,

notwithstanding the form’s reference to “all interviews,” she

did not “necessarily” request nondisclosure in every interview

and did not do so of Navarro. Id. at 194. (Later in the

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transcript, Odell appears to contradict herself as to Navarro, but

Banner represents, without contradiction, that was a

transcription error. See Pet’r Br. 13 n.1.) Navarro did not

testify that he was asked to keep confidential the matter under

investigation or his interview with Odell.

Odell also testified that she made nondisclosure requests

only during investigations in which she needed to speak to

more than one person, so as to “keep the investigation as pure

as possible.” Id. at 259. Asked whether there are “particular

types of investigations that you have particular sensitivity

issues where you may ask someone to keep things

confidential,” Odell mentioned sexual harassment, hostile

work environment, and “[s]uspicion of abuse or something like

that.” Id. at 259-60. Neither her testimony nor any other

evidence in the record, however, establishes whether Banner

categorically requested investigative nondisclosure in those

types of investigations, or whether Odell was instead giving

examples of circumstances in which a case-specific decision in

favor of a confidentiality request was more likely to be

appropriate.

The ALJ held that Banner’s Confidentiality Agreement

violated the National Labor Relations Act, but that its

investigative nondisclosure policy and its treatment of Navarro

did not. See Banner Health Sys., 358 NLRB 809, 812-15

(2012) (ALJ Op.). The Board affirmed the ALJ’s decision in

part, reversing only as to the investigative nondisclosure

policy. As to both invalidation of the Confidentiality

Agreement and rejection of Navarro’s individual retaliation

claim, the three-member Board panel was unanimous. A two-

member majority further held, contrary to the ALJ’s

determination, that Banner had an unlawful policy of asking

employees not to discuss certain types of workplace

investigations without performing the requisite individualized

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inquiry into the need for confidentiality. See id. at 809-11

(Board decision). We vacated and remanded the Board’s

decision following NLRB v. Noel Canning, 134 S. Ct. 2550

(2014). See Banner Health Sys. v. NLRB, No. 12-1359, Doc.

1505654 (D.C. Cir. Aug. 1, 2014) (per curiam order). A

properly constituted three-member panel thereafter reached the

same conclusions as the prior panel, again over one member’s

partial dissent. See Banner Health Sys., 362 NLRB No. 137

(2015).

II. Legal Framework

Section 7 of the National Labor Relations Act guarantees

covered employees “the right to self-organization, to form,

join, or assist labor organizations, to bargain collectively

through representatives of their own choosing, and to engage

in other concerted activities for the purpose of collective

bargaining or other mutual aid or protection.” 29 U.S.C. § 157.

Thus, the Act “protects employees’ rights to discuss

organization and the terms and conditions of their employment,

to criticize or complain about their employer or their conditions

of employment, and to enlist the assistance of others in

addressing employment matters.” Quicken Loans, Inc. v.

NLRB, 830 F.3d 542, 545 (D.C. Cir. 2016). Under “settled

Board precedent,” the right to discuss the terms and conditions

of employment encompasses the “right to discuss discipline or

disciplinary investigations with fellow employees.” Inova

Health Sys. v. NLRB, 795 F.3d 68, 85 (D.C. Cir. 2015).

Section 8(a)(1) of the Act makes it an “unfair labor

practice” to “interfere with, restrain, or coerce employees in the

exercise of [Section 7] rights.” 29 U.S.C. § 158(a)(1).

Employers that violate Section 8 are subject to civil sanction

by the Board. Id. at § 160(a). Where an employer’s rule does

not explicitly limit Section 7 activity, the Board asks “whether

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the rule (1) could be reasonably construed by employees to

restrict [such] activity, (2) was adopted in response to such

activity, or (3) has been used to restrict such activity.” Hyundai

Am. Shipping Agency, Inc. v. NLRB, 805 F.3d 309, 313-14

(D.C. Cir. 2015).

Whether an employer’s rule could be reasonably construed

to restrict protected activity is an “objective inquiry” in which

“courts focus on the text of the challenged rule.” Quicken

Loans, 830 F.3d at 545-46 (internal quotation marks and

alteration omitted). Any ambiguity in the rule is construed

against the employer. Cintas Corp. v. NLRB, 482 F.3d 463,

468 n.2 (D.C. Cir. 2007) (citing Lafayette Park Hotel, 326

NLRB 824, 828 (1998)). “[T]he mere maintenance of a rule

likely to chill section 7 activity, whether explicitly or through

reasonable interpretation, can amount to an unfair labor

practice even absent evidence of enforcement of the rule by the

employer.” Quicken Loans, 830 F.3d at 546 (quoting

Guardsmark, LLC v. NLRB, 475 F.3d 369, 379 (D.C. Cir.

2007)) (internal quotation marks omitted). Maintaining a rule

that is reasonably likely to chill Section 7 activity is an unfair

labor practice unless the employer “present[s] a legitimate and

substantial business justification for the rule, outweighing the

adverse effect on the interests of employees.” Hyundai, 805

F.3d at 314.

On review, the Board’s determinations are “entitled to

considerable deference.” Adtranz ABB Daimler-Benz Transp.,

N.A., Inc. v. NLRB, 253 F.3d 19, 25 (D.C. Cir. 2001). The

Court will uphold the Board’s decision unless it “relied upon

findings that are not supported by substantial evidence, failed

to apply the proper legal standard, or departed from its

precedent without providing a reasoned justification for doing

so.” E.I. Du Pont De Nemours & Co. v. NLRB, 682 F.3d 65,

67 (D.C. Cir. 2012).

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III. Analysis

A. Confidentiality Agreement. The Board’s unanimous

conclusion that Banner’s Confidentiality Agreement struck at

the heartland of Section 7 activity without adequate

justification withstands our deferential review.

Banner’s Confidentiality Agreement was overbroad. It

explicitly directed employees not to discuss co-workers’

“[p]rivate employee information (such as salaries, disciplinary

action, etc.)” unless the information was “shared by the

employee.” J.A. 86. Banner insists that the Agreement was

most reasonably read as limited to information Banner was

entitled to suppress, and could not be “reasonably construed by

employees to restrict § 7 activity.” Hyundai, 805 F.3d at 313.

But the ALJ squarely held, and the Board affirmed, that

Banner’s Agreement “could reasonably be construed to

prohibit Section 7 activity.” 358 NLRB at 814.

Our precedents on employees’ Section 7 rights to discuss

employment terms and conditions support the Board’s

decision. We have approved a hospital’s rule barring

discussion of “confidential information concerning patients or

employees,” because a reasonable employee would not assume

that the term “confidential information” included information

about the terms and conditions of employment—the free

exchange of which is “essential[] to successful self-

organizing.” Cmty. Hosps. of Cent. California v. NLRB, 335

F.3d 1079, 1088-89 (D.C. Cir. 2003). But we have disapproved

a hospital’s confidentiality rule where it more broadly

prohibited discussion of “[i]nformation concerning patients,

[employees], or hospital operations.” Brockton Hosp. v. NLRB,

294 F.3d 100, 106-07 (D.C. Cir. 2002). At the same time,

“confidential information” cannot itself “be defined so broadly

as to include working conditions.” Double Eagle Hotel &

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Casino v. NLRB, 414 F.3d 1249, 1260 (10th Cir. 2005)

(sustaining Board invalidation of policy defining “confidential

information” to include salary information); see also Flex Frac

Logistics, L.L.C. v. NLRB, 746 F.3d 205, 209 (5th Cir. 2014)

(invalidating confidentiality clause encompassing “personnel

information,” which the Board read to cover wage

information).

In the Confidentiality Agreement challenged here, Banner

described “confidential information” as encompassing

“[p]rivate employee information,” including “salaries” and

“disciplinary action.” J.A. 86. Even if a reasonable employee

would not have thought such quintessential Section 7

information was covered by the term “confidential

information” standing alone, Cmty. Hosps., 335 F.3d at 1089,

Banner’s Agreement expressly reached information about

salaries and employee discipline. A reasonable employee

could well understand Banner’s rule to prohibit the very

discussion of terms and conditions of employment that Section

7 protects. That is the sort of overbreadth our precedents

squarely forbid. See, e.g., Cintas, 482 F.3d at 465 (invalidating

policy barring employees from discussing “any information

concerning the company”); Hyundai, 805 F.3d at 314-15

(invalidating policy preventing employees from “disclos[ing]

information or messages” exchanged on the company’s

internal network except to “authorized persons”).

Banner’s Confidentiality Agreement is not salvaged by its

safe harbor allowing employees to discuss information about

salaries and discipline when “shared by the employee” whom

the information concerned. The Board has recognized that

restricting employees’ “use of information innocently

obtained” interferes with Section 7 rights. Labinal, Inc., 340

NLRB 203, 210 (2003). The Confidentiality Agreement’s

permission to discuss information “shared by the employee” is

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ambiguous—and hence inadequate to protect employees’ right

to share innocently obtained information—on at least two

fronts.

First, it is not clear with whom the information must be

“shared” in order to be fair game for employee discussion. For

an employee to discuss her co-worker’s unfair working

conditions, would she need to have heard the information

directly from the co-worker, or would it suffice that she heard

the information secondhand? And would she need the co-

worker merely to divulge the information voluntarily, or also

to authorize further dissemination?

Second, it is not clear how Banner’s rule would apply to

situations where information leaked inadvertently, such as

where an employee left a paystub on a widely accessible office

photocopier. See, e.g., Labinal, 340 NLRB at 209-10 (holding

that employee innocently obtained wage information when co-

worker sitting beside her opened a paystub in her line of

vision). The term “shared” in Banner’s Agreement does not

plainly allow discussion of information innocently obtained but

not actively shared; we would not ordinarily say that an

employee “shared” her paystub by leaving it on the copier or

opening it in view of coworkers. In sum, permission to use

information only insofar as it has been “shared” may require

consent to the specific use, yet the Board has held that “[t]o

prohibit one employee from discussing another employee’s pay

without the knowledge and permission of the other employee

muzzles employees who seek to engage in concerted activity

for mutual aid or protection.” Id. at 210. Because a reasonable

employee could interpret Banner’s Confidentiality Agreement

as prohibiting discussion of the working conditions of any

employee who has not expressly authorized the particular

discussion, the Board reasonably found a violation of Section

8.

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The Board also reasonably determined that Banner failed

to present “a legitimate and substantial business justification”

for its Confidentiality Agreement outweighing the burden it

imposes on employees. Hyundai, 805 F.3d at 314. The

Agreement is not tailored to Banner’s concededly substantial

interest in protecting patient privacy, see Pet’r Br. 41, because

it is not limited to “[p]atient information,” but separately

identifies “[p]rivate employee information … not shared by the

employee” as “confidential information.” J.A. 86. Neither is

Banner’s Confidentiality Agreement tailored to its asserted

interest in respecting antidiscrimination and privacy laws, such

as by forestalling potential retaliation against employees who

press EEO complaints or complying with the Health Insurance

Portability and Accountability Act of 1996. See Pet’r Br. 41.

As written, the Agreement could chill discussion of

quintessential Section 7 information—including salaries and

discipline—even when such discussion would not conflict with

other applicable laws.

The Board’s remedial order requires Banner to post a

remedial notice “at all facilities where [it] utilizes its

confidentiality agreement.” 362 NLRB No. 137, at *1 n.3. We

defer to the Board on remedial matters unless its order is “a

patent attempt to achieve ends other than those which can fairly

be said to effectuate the policies of the Act.” Petrochem

Insulation, Inc. v. NLRB, 240 F.3d 26, 34-35 (D.C. Cir. 2001)

(quoting Virginia Elec. & Power Co. v. NLRB, 319 U.S. 533,

540 (1943)). Banner objects that the Board lacked evidence

that Banner used the Confidentiality Agreement beyond the

hospital where Navarro worked. But the Agreement itself

contains a “Banner Health” logo and refers to “Banner” and

“BH”; nothing suggests that it applies only at Banner Estrella

Medical Center. J.A. 86. It was within the Board’s “broad

discretionary power” over remedies to order Banner to post a

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notice wherever it used the Agreement. Petrochem, 240 F.3d

at 34.

B. Investigative Nondisclosure Policy. The Board also

sanctioned Banner for maintaining a categorical nondisclosure

rule regarding certain types of workplace investigations, but we

deny enforcement of that part of the Board’s Order because the

record lacks substantial evidence that Banner had such a policy.

As recounted above, the Board relied exclusively on the

Interview of Complainant form and Odell’s limited and

equivocal testimony about how and when it was used. The

form, under the header “Introduction for all interviews,” set

forth a scripted nondisclosure request. Odell testified,

however, that she did not in practice request nondisclosure in

“all” interviews, nor did she make any such request of Navarro.

See Tr. at 194. Instead, Odell said she would request

nondisclosure only when her investigation required her to

speak to more than one person, id. at 258, and “[j]ust in the

more sensitive situations,” id. at 260. She identified sexual

harassment, hostile work environment, and “[s]uspicion of

abuse” cases as “particular types of investigations … where

[she] may ask someone to keep things confidential.” Id. at 259-

60.

On that evidence, the Board found the Interview of

Complainant form “prescribes a standard ‘Introduction for all

Interviews’” that “directs the investigator” to request

nondisclosure. 362 NLRB No. 137, at *2. The Board

interpreted Odell’s testimony that she requested nondisclosure

“[j]ust in the more sensitive situations,” Tr. at 260, as

establishing that she “request[ed] confidentiality in any

investigation into alleged sexual harassment, hostile work

environment claim, charge of abuse, or similar alleged

misconduct.” 362 NLRB No. 137, at *6. The Board further

found no evidence that Odell “made any individualized

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determinations that confidentiality was necessary to maintain

the integrity of any particular investigation or any particular

interview.” Id. at *2. That categorical approach, the Board

concluded, violated its precedents placing the burden on the

employer to determine, on a “case-by-case” basis, that

confidentiality is necessary “based on objectively reasonable

grounds for believing that the integrity of the investigation will

be compromised without confidentiality.” Id. at *5 (citing

Hyundai Am. Shipping Agency, Inc., 357 NLRB 860, 874

(2011); Phoenix Transit Sys., 337 NLRB 510 (2002); Desert

Palace, Inc., 336 NLRB 271 (2001)).

Even under our deferential standard of review, the Board

made unwarranted logical leaps that the evidence cannot fairly

support. Odell was never asked whether her approach was

categorical in the types of investigations to which she referred,

or whether she instead requested confidentiality only when she

saw a case-specific need for it. In particular, Odell’s testimony

identifying sexual harassment and other types of cases where

she “may ask someone to keep things confidential” did not

suggest that she necessarily did so in all such cases. Tr. at 259-

60. Nor does her statement that she requested nondisclosure

“[j]ust in the more sensitive situations,” id. at 260, mean she

did so without reference to the individual features of a sensitive

investigation. As Banner points out, “a few specific questions”

could have established whether Odell routinely requested

confidentiality “whenever she conducted certain types of

investigations.” Pet’r Reply Br. 1.

The Board is surely entitled to draw “reasonable

inferences” from the evidence, Tasty Baking Co. v. NLRB, 254

F.3d 114, 124-25 (D.C. Cir. 2001), but here Odell was simply

never asked key questions to establish whether, in practice,

Banner had a policy of categorically requesting nondisclosure

regarding any particular kind of investigation. Banner’s

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counsel acknowledged at oral argument that the nondisclosure

script, standing alone, could well chill workers’ protected

communications about the terms and conditions of

employment—but only if they were aware of its contents. See

Oral Arg. at 12:27-12:58. As it stands, the record is devoid of

evidence that any employee was aware of the form or the

content of its nondisclosure script. Odell’s testimony

suggested that, despite the header, Banner’s policy was not to

request nondisclosure in “all investigations.” But her

testimony was simply too terse and unclear to sustain the

Board’s determination that Banner had a policy of categorically

requesting nondisclosure of the entire subset of investigations

that addressed “alleged sexual harassment, hostile work

environment claim, charge of abuse, or similar alleged

misconduct.” 362 NLRB No. 137, at *6.

Because the lack of substantial evidence dooms this part

of the Board’s Order, we need not address Banner’s (or

amici’s) arguments that the Board failed to balance employees’

Section 7 rights against employers’ interests in nondisclosure

of workplace investigations. Nor need we opine on the Board’s

requirement of a case-by-case approach to justifying

investigative confidentiality. Cf. Hyundai, 805 F.3d at 314

(declining to endorse the Board’s “novel view” but holding that

Hyundai’s rule prohibiting discussion of all matters under

investigation “was so broad and undifferentiated that the Board

reasonably concluded that Hyundai did not present a legitimate

business justification for it”). Finally, Banner’s argument that

the Board violated due process by finding a violation on a

theory not litigated before the ALJ is not properly before us, as

Banner failed to raise it before the Board. See Int’l Ladies’

Garment Workers’ Union v. Quality Mfg. Co., 420 U.S. 276,

281 n.3 (1975). Banner also failed to raise, and thus forfeited,

any argument that the violations the Board found were

insufficiently related to those alleged in Navarro’s charge. See

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Parsippany Hotel Mgmt. Co. v. NLRB, 99 F.3d 413, 417-19

(D.C. Cir. 1996); Cmty. Hosps, 335 F.3d at 1088.

***

Banner’s petition for review is granted as to the

investigative nondisclosure policy. The Board’s cross-

application for enforcement is granted as to the Confidentiality

Agreement. The case is remanded to the Board for further

proceedings consistent with this opinion.

So ordered.