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At-will at risk? NLRB challenges Hyatt handbook’s employment at-will acknowledgement

June 18th, 2012  |  Lisa Milam-Perez

Is the National Labor Relations Board taking aim at the very notion of at-will employment? Labor attorneys at Crowell & Moring think so.

In a client alert issued last month, the law firm spotlighted a complaint against Hyatt Corp issued by the NLRB’s Phoenix regional office on February 29. In it, the board takes issue with the hotel chain’s handbook provisions requiring employees to acknowledge they are employed at will and that at-will status may only be altered by a Hyatt executive.

Calling the complaint “an unprecedented challenge to employee handbook receipt provisions,” the firm predicts the Hyatt complaint “may be a prelude to a new Board enforcement target: long-settled state law principles of employment at will.”

“It’s one of the most extraordinary complaints I’ve read in over 35 years of practicing before the NLRB,” Jeffrey W. Pagano, a Crowell & Moring partner (and himself a former NLRB attorney) told CCH.

“When an employer offers an employee a job, it creates the terms of employment. Hyatt says, ‘I don’t care what anyone else promised you, no one else has any authority to vary those terms other than what’s in the handbook and the only one who can do that is the president or chief operating officer,’” Pagano said. “Here’s the NLRB saying that is unlawful. It’s saying, ‘you can’t tell an employee that an oral or written statement made by a manager can’t be relied upon to vary the scope of the employment relationship that the employer is willing to enter into.’”

Challenged handbook terms. The general counsel found fault with several of the Hyatt handbook’s social media provisions—no surprise here, to those with their finger on the pulse of the agency’s current enforcement initiatives. But the complaint went beyond Hyatt’s social media policies to charge that certain employee acknowledgement provisions—common elements of many company handbooks—are overly broad and discriminatory (although not, incidentally, coercive):

• “I understand 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 Hyatt’s president or executive vice president/COO.
• “[T]he at-will status of my employment… can only be changed in a writing” signed by the employee and one of the two Hyatt executives.

Until the Hyatt complaint was issued, “such routine employee acknowledgments had never been questioned, even in part, by the Board or its General Counsel,” according to Crowell & Moring.

In fact, however, in a decision issued several weeks before the Hyatt complaint was filed, an ALJ ruled that the American Red Cross violated Sec. 8(a)(1) of the Act with a handbook receipt provision requiring employees to acknowledge that “the at-will employment relationship cannot be amended, modified or altered in any way.” In that case, the language was clearly more overly broad on its face, though. And, unlike in Hyatt, the objectionable provision was accompanied by the unlawful discharge of an employee who balked at signing it—thus exacerbating by application its potential to chill Sec. 7 rights.

The acknowledgement is the issue. The Hyatt complaint is a bit of a head-scratcher, particularly because it does not challenge handbook provisions that require employees to acknowledge their understanding of what “at-will employment” actually means. The general counsel had no problem with the clause: “[At-will] means I am free to separate my employment at any time, for any reason, and Hyatt has these same rights.” Nor did he find fault with a provision requiring employees to acknowledge that “nothing in this handbook is intended to change my at-will employment status.” Also surviving board scrutiny: an employee acknowledgement that “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.”

“Why is telling an employee he is ‘at will’ unlawful, but telling him what ‘at will’ means is lawful?” Pagano pondered. “It is lawful to explain what ‘at will’ is, but unlawful to call it by its real name?”

“The GC’s assertion that common, well-understood ‘at-will’ employee handbook provisions violate the Act is another example of the significant shift in the Board’s Sec. 8(a)(1) analysis,” observed Pat Hoban, an attorney with Zashin & Rich Co, L.P.A, a Cleveland, Ohio firm representing employers. Hoban said the complaint demonstrates that the board has significantly altered its Martin Luther Memorial Home, Inc test, which requires evidence that an employee would reasonably construe an employment policy to prohibit Sec. 7 activity. “The new test appears to be how the GC construes employment policies based on a presumption that all employers attempt to stifle Sec. 7 activity,” Hoban said. “The GC’s relentless redefinition of language common to virtually every employer handbook to find violations without evidence of unlawful employer conduct or motive has created new costs and disruptions for employers.”

Yet it’s in the required acknowledgement of at-will status that a handbook may run afoul of the Act, to paraphrase the GC’s position as reflected in post-hearing briefs in American Red Cross. The employee’s signing of the acknowledgement form “is essentially a waiver in which an employee agrees that his/her at-will status cannot change, thereby relinquishing his/her right to advocate concertedly, whether represented by a union or not, to change his/her at-will status,” the law judge wrote, explaining the agency’s reasoning.

“For all practical purposes,” the GC’s brief suggests, the employee acknowledgement requirement “premises employment on an employee’s agreement not to enter into any contract, to make any efforts, or to engage in conduct that could result in union representation and in a collective-bargaining agreement, which would amend, modify, or alter the at-will relationship. Clearly such a clause would reasonably chill employees who were interested in exercising their Sec. 7 rights.” An at-will disclaimer is one thing, but requiring employees to signal their assent to it is quite another.

A creature of state law. “How does the elimination of employee acknowledgement of employment at will in any way effectuate the purpose and policy of the NLRA? It doesn’t,” Pagano charged, contending the board was overreaching. “Employment is typically a state-law relationship; this whole complaint is an attempt by the board to use federal jurisdiction to regulate the state-law employment relationship.”

With the Hyatt complaint, at-will employment “has been recast into, in effect, just-cause relationships,” Pagano suggested. “We’re driving down a road here that is really usurping state law and individual contractual rights. What if the employees all had individual employment agreements instead of a handbook? Could the board go in and invalidate an individual employment contract? The board is literally controlling the terms and conditions of employment of nonunion employees.”

Board responds. Crowell & Moring’s interpretation of the complaint “is not correct,” Nancy Cleeland, the NLRB’s director of public affairs, told CCH. “In essence, the complaint says the handbook could be construed as prohibiting employees from joining together to seek a negotiated change in their at-will status.” (emphasis is Cleeland’s). “Employees do have the right under the NLRA to act together to seek improvements in their wages and working conditions, and that could include seeking a change in their at-will status.”

“It’s not the at-will status per se that is the problem,” Cleeland stressed.

Earlier this week, however, Acting GC Lafe Solomon, speaking at the Connecticut Bar Association’s annual meeting, indicated that blanket at-will statements themselves will face closer NLRB scrutiny as the next agency enforcement target, according to the Connecticut Employment Law Blog.

For his part, Pagano dismissed the board’s reference to the bargaining issue as “a ruse.” As he noted, “every term of employment is negotiable—overtime, holidays, pensions—that’s the NLRA at its most basic. And at-will is no different. By the board’s reasoning, an employment handbook could not contain a provision stating that overtime would be paid for hours worked over 40 in a work week lest employees misconstrue the clause as prohibiting any bargaining over overtime premiums,” according to Pagano. “So the argument that the at-will provision is overly broad because it could be construed as restricting organizing campaigns is disingenuous. In fact, the complaint doesn’t even say the provision is ‘coercive,’ just that it’s overly broad.”

Hyatt settles. Recently, Hyatt reached a settlement, approved by the NLRB regional director, in which it agreed not to maintain the “overly broad” employee acknowledgement form. The hotel chain also agreed to revise or rescind employees’ acknowledgement forms that included the challenged at-will provision and to furnish written notice that the overly broad language at issue would no longer be considered to be in effect. Under the settlement terms, notice was to be posted at all U.S. full-service hotels managed by Hyatt and published on Hyatt’s intranet site. (A separate notice will be posted at other Hyatt facilities, where the challenged handbook provision was not in effect.)

“Hyatt respects its employees’ legal rights and is committed to abiding by the National Labor Relations Act,” the company told CCH. “Hyatt is not, in fact, removing the at-will language from its employee handbooks, but instead will modify the acknowledgment form to ensure that employees understand that the at-will nature of their employment may be modified only by an enforceable executed written agreement,” the company made clear.

Why Hyatt? Why now? UNITE HERE, the charging party union, did not respond to a CCH request for comment. But in Pagano’s view, the board targeted Hyatt because of the prospect of a nationwide remedy—and a multiemployer remedy at that, with 12 affiliated Hyatt entities operating independently throughout the country. The relief is not limited to unionized Hyatt locations, he noted. The Hyatt case “has huge national implications,” Pagano predicted.

“Employers need to be concerned,” said Chris Bourgeacq, labor and employment counsel at AT&T and member of the CCH Employment Law Daily Advisory Board. “With at-will disclaimer language appearing in most smart employers’ handbooks or personnel policies, we could experience yet another sea change in policy review actions as we’ve had with social media and the board.”

Social media: the new union? Pagano suggests the Hyatt enforcement action, in tandem with the NLRB’s current focus on social media, reflect a broader mission by the agency. To a certain extent, the board’s activity on the social media front makes sense now that the very means of communication have changed, he acknowledged. But it goes deeper, Pagano contends.

“NLRB law on what is a labor organization has historically been liberal; you only need two people. But cable TV, personal computers, social media—as these interpersonal vehicles have become more utilized, unions have lost their power. The board realizes that because of social media, employees don’t need a labor organization to engage in concerted activity. So the board now is trying to create labor organizations through social media,” he reasoned.

“But this new organization has no representative of sorts, no structure. In challenging at-will employment, the board is attempting to give it structure—by providing nonunion employees the same rights that organized employees would have. In the Hyatt case, I believe, we see the connection: you’re giving nonunion employees rights by allowing them to avoid at-will employment—to avoid the limitations on employment that the employer has put in its handbook.”

“What’s driving everything is social media,” according to Pagano. “Social media is the new union.”