Regulators Challenge Confidential Internal Investigations

Experts say employers should determine confidentiality on a case-by-case basis to avoid liability.

whistleblowerWhen James Navarro arrived at his job as a medical equipment technician one morning in February 2011, something wasn’t right. Due to a broken water pipe in the Arizona hospital where he worked, employees didn’t have steam and hot water to follow their normal protocol for sterilizing surgical equipment. Navarro’s supervisor instructed him to use a different sterilization machine and get hot water from the break room coffee maker. Concerned about patient safety, Navarro refused to follow his supervisor’s instructions and complained about the problems to his co-workers.

The supervisor reported Navarro to human resources. Finding that Navarro had been insubordinate, the hospital issued him a nondisciplinary coaching. Shortly thereafter, Navarro received a subpar performance review.

Navarro filed a charge of unfair labor practices with the National Labor Relations Board (NLRB), alleging that the coaching and poor performance review were retaliation for engaging in a protected activity—complaining about job conditions. An administrative law judge (ALJ) determined that Banner Health System, which owns the hospital where Navarro worked, did not violate the labor laws. On appeal, the NLRB did something no one expected.

The board affirmed the ALJ’s decision that there was no unlawful retaliation against Navarro. However, it found that Banner violated the National Labor Relations Act by imposing a confidentiality policy while investigating Navarro’s claims.

“We find that the Respondent’s generalized concern with protecting the integrity of its investigations is insufficient to outweigh employees’ Section 7 rights,” the board wrote.

In doing so, the board has created a host of unintended problems for employers, many of whom routinely request that employees keep investigations private.

“The labor board has an unrealistic sense of what companies are doing and why they’re doing it,” says Tom Gies, a partner at Crowell & Moring. “It’s really outmoded and paternalistic. Confidential investigations are not a strategy to keep people from unionizing. Most nonunion employers aren’t even thinking about unions. There are too many other things to think about.”

Balancing Analysis

Banner had a policy that it required all employees to sign upon hire acknowledging that disciplinary investigations are confidential and that employees could be disciplined or discharged for failing to maintain confidentiality. The NLRB decided that this policy was too broad and would have the effect of barring employees from discussing workplace grievances with one another or union representatives in violation of the labor laws.

However, the board did not say that all confidentiality policies were unlawful, per se. Rather, the board determined that confidentiality can be justified on a case-by-case basis. For example, the board stated that confidentiality could be justified to protect witnesses, prevent destruction or fabrication of evidence, or stop a cover-up. But simply stating that these issues are a concern in all investigations is not enough—Banner Health System v. Navarro places the burden on the employer to conduct this analysis in each case and to provide sufficient rationale for confidentiality.

“Nine times out of 10, when an employer requests confidentiality, it’s because of these factors,” says Kristin Erenburg, an attorney at Walter Haverfield. “Now employers need to document on a case-by-case basis how the facts and circumstances of the investigation required confidentiality in that particular case.”

This requires employers to take proactive steps to avoid liability. One is retraining employees who conduct investigations that this analysis is required and must be documented. The other is reviewing the company’s handbooks and policies and eliminating blanket confidentiality rules that don’t require an individual analysis in each case.

Overlapping Concerns

The decision is of major concern to employers because a host of different laws, including Title VII of the Civil Rights Act of 1964, the Sarbanes-Oxley Act, securities laws and the Foreign Corrupt Practices Act, require companies to conduct investigations when they receive a report of wrongdoing. For instance, when confronted with allegations of sexual harassment, Title VII imposes liability if the employer does not conduct a thorough investigation and take prompt remedial action.

Confidentiality has long been a routine request when doing such investigations. For one thing, it’s harder for an employer to get to the truth if employees have an opportunity to discuss the matter together before being interviewed. Likewise, discussions of allegations of wrongdoing could lead to intimidation or harassment of witnesses. Confidentiality is also important to protect the privacy of the accuser and the alleged harasser.

“That could expose the employer to other liabilities,” says John Baker, counsel at White and Williams. “The disclosure of private or embarrassing information could lead to further lawsuits.”

Employers are also concerned that workers will be less likely to report misconduct if they can’t be certain that their reports will be kept private.

“Without confidentiality, complainants or witnesses may be reluctant to come forward. Given the economy, people are very concerned about bringing trouble on themselves,” Erenburg says.

Broader Application

Although NLRB decisions are not binding precedent in courts considering claims that don’t concern a union, there are indications that there is momentum for applying the NLRB’s logic outside of the unionized workforce context.

Shortly after the NLRB decision in Banner Health System, the Equal Employment Opportunity Commission’s (EEOC) Buffalo District Office issued a predetermination letter adopting the same position—blanket confidentiality rules violate the anti-retaliation provision of Title VII.

“The most flagrant infringement of the rights that are conferred on an individual by Title VII’s retaliation provisions is the denial of the right to oppose discrimination. So, discussing one’s complaints of sexual harassment with others is protected opposition,” the letter states. “An employer who tries to stop an employee from talking with others about alleged discrimination is violating Title VII rights, and the violation is flagrant not trivial.”

The letter is not binding authority, but it indicates that employers must be cautious about instructing employees to remain silent about ongoing investigations regardless of whether the workplace is unionized.

“Given the NLRB decision, it would not surprise me if the EEOC made this part of its formal policy agenda,” Erenburg says.

Silence Isn’t Golden

Since issuing its decision in Banner Health System v. Navarro, the National Labor Relations Board has on several other occasions found that employer confidentiality policies were overbroad and violated the National Labor Relations Act (NLRA).

For example, in Flex Frac Logistics and Kathy Lopez, the board found on Sept. 11 that an employer prohibition on disclosure outside the company of “personnel information and documents” was unlawful because it could lead an employee to believe that the company prohibited workers from discussing wages and other terms and conditions of employment with union representatives. Likewise, in Costco Wholesale Corporation and United Food and Commercial Workers Union, Local 371, the board found on Sept. 7 that Costco violated the NLRA by prohibiting employees from discussing other employees’ “sick calls, leaves of absence, FMLA call-outs, ADA accommodations, workers’ compensation injuries, and personal health information.”



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Originally published on InsideCounsel. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


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