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eLABORate: Broad "At-Will Employment" Disclaimers Can Violate The National Labor Relations Act

July 26, 2012

At-will disclaimers in employee handbooks typically clarify that the employment may be terminated at any time, for any reason, and by either party, and ordinarily do not allow the at-will status to be modified unless it is reduced to writing and agreed to by the employer. Employers rely on these provisions to protect themselves from claims that an employee has an enforceable employment contract with the employer based on the handbook's employment provisions. Recently however, the National Labor Relations Board ("NLRB" or the "Board") has closely scrutinized and disapproved of broadly-worded at-will disclaimers that can have a "chilling effect" on the employee's right to engage in concerted activity under the National Labor Relations Act ("NLRA" or the "Act"), to the extent that they potentially imply that union representation and collective bargaining will not alter the at-will employment status. In two recent complaints, the NLRB's Acting General Counsel has taken issue with seemingly common at-will provisions, indicating that there may be a new enforcement target that all employers should be aware of when drafting at-will provisions.

NLRB v. American Red Cross

On February 1, 2012, the American Red Cross in Tucson, Arizona was found to be in violation of Section 8(a)(1)[1] of the NLRA by "[m]aintaining an overly-broad and discriminatory provision in its 'Agreement and Acknowledgement of Receipt of Employee Handbook'" form. NLRB v. American Red Cross, 2012 WL 311334, *18 (N.L.R.B. Feb. 1, 2012). Specifically, the complaint alleged that the at-will provision in American Red Cross's employee handbook was overly-broad, discriminatory, and violated the Act because it required the employee to sign an acknowledgement stating, "I further agree that the at-will employment relationship cannot be amended, modified or altered in any way." Id. at *2.

In determining whether the at-will employment provision violated the Act, the Administrative Law Judge ("ALJ") stated that "the appropriate inquiry is whether the [work rule] would reasonably tend to chill employees in the exercise of their Section 7 rights," [2] citing Lafayette Park Hotel, 326 NLRB 824, 825 (1998). Id. at *16. The ALJ also relied on previous NLRB precedent set out in Lutheran Heritage Village-Livonia, 343 NLRB 646, 646 (2004), which provided that a work rule violates the Act upon a showing that: "(1) employees would reasonably construe the language to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of Section 7 rights." Id.
Even though the ALJ acknowledged that the at-will provision at issue did not "mention union or protected concerted activity, or even the raising of complaints involving employees' wages, hours and working conditions," there was "no doubt that employees would reasonably construe the language to prohibit Section 7 activity." The ALJ reasoned that the signing of the at-will acknowledgement form was essentially a waiver which forced the employee to agree that their at-will status could not be changed, thereby relinquishing their right to advocate concertedly, whether represented by a union or not, to change their at-will status. The ALJ stated that the provision premised employment on the employee's agreement not to enter into any contract, to make any efforts, or to engage in any conduct could result in union representation and in a collective-bargaining agreement, which would amend, modify, or alter the at-will relationship. The ALJ stated that "[c]learly such a clause would reasonably chill employees who were interested in exercising their Section 7 rights." Id. at 16.
 
The Red Cross contended that, despite its position that the clause was not unlawful, that it repudiated its conduct by permitting the employee to strike out the offensive wording upon her objection before signing the acknowledgement form. Id. at *16-17. Further, after receiving the complaint, the Red Cross deleted the entire provision and re-issued the handbook for re-execution by all of its employees, out of "an abundance of caution." Accordingly, the Red Cross argued that: (1) since it did not enforce the provision against the employee, it could not have restricted her Section 7 activity; and (2) the recently amended language in the handbook remedied any previous overly-broad and discriminatory provisions, making the issue before the Board moot. Id. at 17.
The ALJ rejected these arguments, holding that the maintenance of the at-will acknowledgment forms [which were still distributed to employees for execution for almost one year after the employee's initial objection] was still an unfair labor practice, "even absent evidence of enforcement." The ALJ also noted that no efforts were made to delete the offending language until after the General Counsel filed the complaint. Further, the ALJ was not convinced that Red Cross employees were adequately informed of the at-will provision retraction or given any assurances that their Section 7 rights would not be interfered with in the future. Therefore, the Red Cross did not establish effective repudiation of the unlawful at-will provisions. Id.  
As a result, the ALJ found that Red Cross violated Section 8(a)(1) of the Act, and ordered it to post notices assuring its employees that it would respect their rights under the Act. In addition to physically posting paper notices, the notices also had to be distributed electronically, i.e., by email, posting on an intranet or internet site, and/or other electronic means, if that was how the Red Cross customarily communicated with its employees, to ensure complete message dissemination.
 
NLRB v. Hyatt Hotel Corp

Shortly after the decision in American Red Cross, the NLRB's Acting General Counsel filed an unfair labor practice complaint against Hyatt Hotels in Phoenix, Arizona stating that its at-will provisions also violated Section 8(a)(1) of the Act because it required employees to acknowledge that their at-will employment status could not be altered unless it was in writing and signed by a top Hyatt executive. NLRB v. Hyatt Hotel Corp., Case 28 CA-061114 (February 29, 2012). Specifically, the provisions at issue provided: 
 
  • "I understand that my employment is 'at will'"
     
  • "I acknowledge that no oral or written statements or representations regarding my employment can alter my at-will employment status, except for a written statement signed by me and either Hyatt's Executive Vice President/Chief Operating Officer or Hyatt's President."
     
  • "In order to retain flexibility in its policies and procedures, I understand Hyatt, in its sole discretion, can change, modify or delete guidelines, rules, policies, practices and benefits in this handbook without prior notice at any time. The sole exception to this is the at-will status of my employment, which can only be changed in a writing signed by me and either Hyatt's Executive Vice President/Chief Operating Officer or Hyatt's President."
     
Again, the Acting General Counsel took the position that these provisions constituted employer interference, restraint and coercion with respect to an employee's exercise of their right to engage in concerted activity should they want to change the status of their employment, as guaranteed by the Act. This case settled before the matter was presented for hearing, and Hyatt agreed to modify its at-will employment policies on a nationwide basis. Similar to the American Red Cross directive, the settlement required Hyatt to revise the at-will provisions, rescind the acknowledgement forms that included the challenged at-will provisions and post written notices in all Hyatt hotels across the country that the at-will language at issue would no longer be in effect.
 
NLRB Response
Lafe Solomon, NLRB's Acting General Counsel, addressed his view and recent interest in at-will disclaimers during a Connecticut Bar Association annual meeting in June 2012. He stated that he is not necessarily targeting policies that generally outline the at-will employment relationship, but explained that an employee acknowledgement which could reasonably lead an employee to believe that even union representation and a collective bargaining agreement could not alter their at-will status is unlawful because it implies a futility of unionization and fails to acknowledge that a collective-bargaining relationship could affect the at-will relationship. 
 
Conclusion

These recent and unprecedented NLRB filings indicate that the Board is expanding its focus to include commonly used at-will employment provisions, and applying Section 7 very broadly to find such provisions unlawful under the Act. Therefore, employers should take great care when drafting at-will employment provisions, and should re-examine such provisions in light of these decisions. Look for further developments on this issue.

 

[1] Section 8(a)(1) of the Act prohibits an employer from interfering with employees as they engage in protected concerted activity.

[2] Section 7 of the Act guarantees employees "the right to self-organization, to form, join, or assist labor organizations . . . and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection." Employees are engaged in protected concerted activities when they act in concert with other employees to improve their working conditions. Eastex, Inc. v. NLRB, 437 U.S. 556 (1987); NLRB v. Washington Aluminum Co., 370 U.S. 9, 14 (1962).