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May 20, 2015 Practice Points

NLRB Strikes Down Macy's Employee Confidentiality Provisions

An ALJ held that recent employee handbook revisions violate employees’ NLRA section 7 rights.

By John Stock

An administrative law judge (ALJ) of the National Labor Relations Board (NLRB) recently struck down certain confidentiality provisions in Macy’s employee handbook on the ground that the provisions violate Macy’s employees’ section 7 concerted-activity rights under the National Labor Relations Act. Macy’s, Inc., NLRB ALJ No. 1-CA-123640 (May 12, 2015). The ALJ held that on the face of the challenged confidentiality provisions, an employee could reasonably construe Macy’s prohibitions against (1) disseminating employee personal data, (2) using Macy’s logo, and (3) directly responding to government investigations as prohibiting or limiting protected concerted activity under the National Labor Relations Act (NLRA). As a result, the offending confidentiality provisions violated section 8(a)(1) of the NLRA. The ALJ ordered Macy’s to either rescind the illegal provisions within 14 days or revise them. Macy’s also was ordered to post a notice to employees penned by the ALJ. This ALJ decision may have far-reaching consequences for how businesses protect their confidential business information.

Macy’s Confidentiality Provisions 
The Macy’s case was submitted to the ALJ on a stipulation of facts among Macy’s, the charging party—the United Food and Commercial Workers Union Local 1445, and the NLRB’s general counsel. The stipulation delineated three Macy’s policies that were the focus of the ALJ’s analysis:  prohibitions regarding (1) dissemination of employees’ personal data, (2) use of Macy’s logo, and (3) employees directly responding to government investigations.

The ALJ’s Analysis 
The ALJ began his analysis by acknowledging that the standard for determining whether Macy’s challenged policies violated the NLRA was established by the NLRB in Lutheran Heritage Village—7 Livonia, 343 NLRB 646 (2004). The initial inquiry under the Lutheran Heritage test is whether the subject policy explicitly restricts activities protected by section 7. If so, it is illegal. If not, the policy will be deemed unlawful “upon a showing of one of the following: employees would reasonably construe the rule to prohibit protected activity, or the rule has been applied to restrict that activity.” [Emphasis added.]

The ALJ acknowledged that the challenged Macy’s policies did not explicitly restrict protected section 7 activities. He further acknowledged that the parties had stipulated that the policies were neither promulgated in response to union activity nor applied in a manner to restrict section 7 rights. However, the ALJ concluded, based on the face of the challenged policies themselves, that a Macy’s employee could reasonably construe the policies to prohibit protected section 7 activity. Therefore, Macy’s restrictions against disseminating employees’ personal data, the use of its logo, and direct responses to government investigations were unlawful. Furthermore, Macy’s savings clause did not cure the illegality of those policies.

Lessons to Be Learned 
The Macy’s ALJ adopted an expansive reading of the Lutheran Heritage test to invalidate Macy’s restrictions on the use of employee personal data, use of the company’s logo, and direct responses to government investigations. In doing so, the ALJ invalidated Macy’s challenged rules without engaging in any meaningful analysis of the employees’ and Macy’s competing rights and obligations. For example, employees have the right to the privacy of their personal information under various federal and state laws. The ordered rescission of Macy’s policies to protect that personal data could result in violations of employees’ privacy rights, while impeding Macy’s ability to protect that personal data.

Similarly, the ALJ stated that he could “see no valid business reason” for Macy’s restriction on the use of its “well known and easily recognized logo.” But Macy’s has a strong business interest in protecting the substantial time and money it has invested in building the goodwill associated with its well-known logo. And Macy’s has a legal right to prohibit others from using its logo without its permission. Indeed, Macy’s could lose its legal rights in its logo if it does not police against unauthorized use. With the ALJ-ordered rescission of its logo policy, Macy’s valuable intellectual-property rights could be put in jeopardy.

Perhaps the most important takeaway from the Macy’s case is that employers must explicitly, and prominently, state in their corporate policies that the employer’s legitimate restrictions to protect employee personal data or corporate intellectual property are not intended to inhibit employees from engaging in protected concerted activity, and will not be applied by the employer to interfere with that activity. Had Macy’s included such disclaimers at the front of its handbook—instead of in a separate document some seven months after the handbook was given to employees—Macy’s seemingly reasonable restrictions might have been deemed lawful.

— John Stock, Benesch Friedlander Coplan & Aronoff LLP, Columbus, OH

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