Costco Blasted Because of Social Media Policy


by Abbey Moland and Ruth Horvatich

Moland, Abigail      Horvatich, Ruth
amoland@mcgrathnorth.com
rhorvatich@mcgrathnorth.com
(402) 341-3070

The NLRB just issued its first decision on a social media policy in Costco Wholesale Corporation, 358 NLRB No. 106 (2012). The Board’s decision confirmed what many employers have feared for last few months: the current NLRB is targeting employers’ social media policies as inhibiting employees’ protected and concerted activity and their right to comment upon or indeed criticize their employer via social media.

In Costco, the NLRB reviewed a number of rules and policies contained within Costco’s employee handbook, which included a social media policy. With respect to some of the more general handbook policies reviewed, the Board found that Costco violated Section 8(a)(1) of the Act by maintaining the following policies, which it found were overbroad and directly restricted Costco employees from engaging in concerted activities:

(a) “unauthorized posting, distribution, removal or alteration of any material on Company property” is prohibited;

(b) employees are prohibited from discussing “private matters of members and other employees . . . includ[ing] topics such as, but not limited to, sick calls, leaves of absence, FMLA call-outs, ADA accommodations, workers’ compensation injuries, personal health information, etc.”;

(c) “[s]ensitive information such as membership, payroll, confidential financial, credit card numbers, social security number or employee personal health information may not be shared, transmitted, or stored for personal or public use without prior management approval”; and

(d) employees are prohibited from sharing “confidential” information such as employees’ names, addresses, telephone numbers, and email addresses.

Under Section 7 of the National Labor Relations Act, employees have the right to engage in “protected concerted activity,” which includes the right to discuss compensation, benefits, terms of employment, as well as supervision. Policies which attempt to prevent those types of discussions are usually found to unlawfully interfere with those rights.

The Board also took aim at Costco’s social media policy. That policy stated:

Any communication transmitted, stored or displayed electronically must comply with the policies outlined in the Costco Employee Agreement. Employees should be aware that statements posted electronically (such as [to] online message boards or discussion groups) that damage the Company, defame any individual or damage any person’s reputation, or violate the policies outlined in the Costco Employee Agreement, may be subject to discipline, up to and including discharge.

Although the policy itself made no mention of Section 7 concerted activity, the Board concluded that the policy contained a broad prohibition against making statements that “damage the Company, defame any individual or damage any person’s reputation” and encompassed concerted communications like protesting Costco’s treatment of its employees. The Board concluded that because the policy failed to provide an exception for employee statements protected by Section 7, employees could reasonably construe the policy’s prohibitions as a restriction on those rights. As such, the Board found that the Rule violated Section 8(a)(1).

While the Costco decision demonstrates that the Board has adopted earlier opinions issued by the Acting General Counsel, and its willingness to expand the exercise of protected concerted activity to social media, two key points are worth noting.

First, the Board noted that its decision does not nullify its holding in another Board decision, Guard Publishing, where the Board found that (a) employees do not have a statutory right to use an employer’s email system for Section 7 activity and (b) an employer may lawfully prohibit employees from using its email system for non-job-related solicitations. What that means for employers is that even if the Board continues to apply the analysis in Costco to future social media policy cases, the Board is not likely to extend that same analysis to email or email systems.

Second, the Acting General Counsel, the person who makes decisions on what cases to pursue against employers (and unions but to a lesser extent), continues to maintain that a Section 7 disclaimer in a social media policy is ineffective to save an overly broad social media policy. However, the fact that the Board in Costco noted a lack of a disclaimer in the Costco policy suggests that including such a disclaimer in a social media policy may in fact be a valid defense to a policy which could otherwise be interpreted as a restriction on Section 7 rights.

Thus, even though the Costco decision was fairly extensive, open issues remain. It is unknown as to whether Costco will appeal this decision to the United States Court of Appeals. In the meantime, employers would be well advised to review their current policies with respect to social media, posting/distribution of material on company property, and employee prohibitions on discussing apparent “sensitive” or “confidential” information and perhaps revise those policies somewhat to make clear that those policies do not prohibit employees from engaging in legitimate protected concerted activity.

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