Banner Health System v. National Labor Relations Board

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 6, 2017 Decided March 24, 2017

No. 15-1245

BANNER HEALTH SYSTEM, DOING BUSINESS AS BANNER
ESTRELLA MEDICAL CENTER,
PETITIONER

v.

NATIONAL LABOR RELATIONS BOARD,
RESPONDENT

Consolidated with 15-1309

On Petition for Review and Cross-Application
for Enforcement of an Order of
the National Labor Relations Board

Mark G. Kisicki argued the cause for petitioner. With him
on the briefs was Elizabeth M. Townsend.

Maurice Baskin and Elizabeth Parry were on the joint
brief for amici curiae for American Hotel & Lodging
Association, et al. in support of petitioner.
 2
Allyson N. Ho, John C. Sullivan, and Judd E. Stone were
on the brief for amicus curiae Association of Corporate
Counsel in support of petitioner.

Joel A. Heller, Attorney, National Labor Relations Board,
argued the cause for respondent. With him on the brief were
Richard F. Griffin, Jr., General Counsel, John H. Ferguson,
Associate General Counsel, Linda Dreeben, Deputy Associate
General Counsel, and Usha Dheenan, Supervisory Attorney.

Before: PILLARD, Circuit Judge, and EDWARDS and
SILBERMAN, Senior Circuit Judges.

Opinion for the Court filed by Circuit Judge PILLARD.

PILLARD, Circuit Judge: This case requires us to decide
whether an employer’s effort to keep certain information
confidential ran afoul of its employees’ established rights under
federal labor law to share employment-related information
with one another in an effort to improve their lot. The National
Labor Relations Board concluded that petitioner Banner
Health’s Confidentiality Agreement unlawfully barred its
workers from sharing information at the heart of labor law’s
concern: information about salaries and employee discipline.
The Board also determined that Banner unlawfully maintained
a categorical policy of asking employees not to discuss certain
kinds of human resources investigations. Such investigative
nondisclosure policies, the Board held, may only be applied on
a case-by-case basis following a threshold determination that
confidentiality is necessary to the particular investigation.

The Board’s invalidation of the Confidentiality Agreement
was reasonable and supported by substantial evidence, and we
therefore grant the application for enforcement on that issue.
But, because the record lacks substantial evidence that Banner
 3
actually maintained a categorical investigative nondisclosure
policy, we grant the petition for review and deny enforcement
as to that portion of the Board’s Order.

I. Background

Banner Health is a large, nonprofit healthcare system that
includes Banner Estrella Medical Center in Phoenix, AZ.
James Navarro worked at Banner Estrella sterilizing surgical
equipment. On February 19, 2011, Navarro learned that he
could not use the autoclave—a large, pressurized steam
sterilizer normally used for sterilizing reusable medical
instruments—because the hospital’s steampipe needed to be
fixed. He was instructed to use hot water from the coffee
machine in the break room for the first step in the cleaning
process, and then to use a low-temperature sterilizer with
hydrogen peroxide. Navarro was concerned that those
procedures violated established protocol. He raised questions
with various supervisors and did some quick research that did
not allay his concerns. After confirming there were adequate
clean instruments available for the day’s scheduled surgeries
and deliveries, Navarro did not sterilize additional instruments.
His supervisor was not pleased. A couple of days later,
Navarro visited Banner’s human resources consultant, JoAnn
Odell, reporting his discomfort with the prescribed procedures
and expressing concern for his job. That afternoon, Navarro’s
supervisor gave him a “nondisciplinary coaching” and, a few
days later, a negative yearly evaluation.

Navarro filed an unfair labor practice charge with the
Board, prompting the Board’s Regional Director to file a
retaliation complaint against Banner. Based on documents
unearthed during discovery, the Regional Director amended the
complaint to include claims that Banner (1) made employees
sign an overbroad Confidentiality Agreement and (2)
 4
maintained an overbroad rule requiring nondisclosure of
investigative interviews.

The main evidence supporting the first claim was the
Confidentiality Agreement itself. The Agreement defined
“confidential information” to include, as relevant here,
“[p]rivate employee information (such as salaries, disciplinary
action, etc.) that is not shared by the employee.” J.A. 86. The
Agreement further stated that “[k]eeping this kind of
information private and confidential is so important that if I fail
to do so, I understand that I could be subject to corrective
action, including termination and possibly legal action.” Id.
According to Odell, all new Banner hires were required to sign
this Agreement.

The primary evidence in support of the charge that Banner
maintained an overbroad investigative nondisclosure policy
was an “Interview of Complainant” form that Odell referred to
during her interview of Navarro. That document contained
prepared statements and questions for human resources
interviewers to read, along with space for notes. It opened with
an “Introduction for all interviews,” part of which stated: “I
ask you not to discuss this with your coworkers while this
investigation is going on, for this reason, when people are
talking it is difficult to do a fair investigation and separate facts
from rumors.” J.A. 81. The only other relevant evidence came
from Odell’s rather general and ambiguous testimony about
how the interview form was used. Odell testified that Banner
employees were never given a copy of that form and that she
“request[ed]” nondisclosure “[h]alf a dozen [times], maybe” in
her 13 months at Banner, and only “in the more sensitive
situations.” See Tr. 186, 193-96, 258-60. She said that,
notwithstanding the form’s reference to “all interviews,” she
did not “necessarily” request nondisclosure in every interview
and did not do so of Navarro. Id. at 194. (Later in the
 5
transcript, Odell appears to contradict herself as to Navarro, but
Banner represents, without contradiction, that was a
transcription error. See Pet’r Br. 13 n.1.) Navarro did not
testify that he was asked to keep confidential the matter under
investigation or his interview with Odell.

Odell also testified that she made nondisclosure requests
only during investigations in which she needed to speak to
more than one person, so as to “keep the investigation as pure
as possible.” Id. at 259. Asked whether there are “particular
types of investigations that you have particular sensitivity
issues where you may ask someone to keep things
confidential,” Odell mentioned sexual harassment, hostile
work environment, and “[s]uspicion of abuse or something like
that.” Id. at 259-60. Neither her testimony nor any other
evidence in the record, however, establishes whether Banner
categorically requested investigative nondisclosure in those
types of investigations, or whether Odell was instead giving
examples of circumstances in which a case-specific decision in
favor of a confidentiality request was more likely to be
appropriate.

The ALJ held that Banner’s Confidentiality Agreement
violated the National Labor Relations Act, but that its
investigative nondisclosure policy and its treatment of Navarro
did not. See Banner Health Sys., 358 NLRB 809, 812-15
(2012) (ALJ Op.). The Board affirmed the ALJ’s decision in
part, reversing only as to the investigative nondisclosure
policy. As to both invalidation of the Confidentiality
Agreement and rejection of Navarro’s individual retaliation
claim, the three-member Board panel was unanimous. A two-
member majority further held, contrary to the ALJ’s
determination, that Banner had an unlawful policy of asking
employees not to discuss certain types of workplace
investigations without performing the requisite individualized
 6
inquiry into the need for confidentiality. See id. at 809-11
(Board decision). We vacated and remanded the Board’s
decision following NLRB v. Noel Canning, 134 S. Ct. 2550
(2014). See Banner Health Sys. v. NLRB, No. 12-1359, Doc.
1505654 (D.C. Cir. Aug. 1, 2014) (per curiam order). A
properly constituted three-member panel thereafter reached the
same conclusions as the prior panel, again over one member’s
partial dissent. See Banner Health Sys., 362 NLRB No. 137
(2015).

II. Legal Framework

Section 7 of the National Labor Relations Act guarantees
covered employees “the right to self-organization, to form,
join, or assist labor organizations, to bargain collectively
through representatives of their own choosing, and to engage
in other concerted activities for the purpose of collective
bargaining or other mutual aid or protection.” 29 U.S.C. § 157.
Thus, the Act “protects employees’ rights to discuss
organization and the terms and conditions of their employment,
to criticize or complain about their employer or their conditions
of employment, and to enlist the assistance of others in
addressing employment matters.” Quicken Loans, Inc. v.
NLRB, 830 F.3d 542, 545 (D.C. Cir. 2016). Under “settled
Board precedent,” the right to discuss the terms and conditions
of employment encompasses the “right to discuss discipline or
disciplinary investigations with fellow employees.” Inova
Health Sys. v. NLRB, 795 F.3d 68, 85 (D.C. Cir. 2015).

Section 8(a)(1) of the Act makes it an “unfair labor
practice” to “interfere with, restrain, or coerce employees in the
exercise of [Section 7] rights.” 29 U.S.C. § 158(a)(1).
Employers that violate Section 8 are subject to civil sanction
by the Board. Id. at § 160(a). Where an employer’s rule does
not explicitly limit Section 7 activity, the Board asks “whether
 7
the rule (1) could be reasonably construed by employees to
restrict [such] activity, (2) was adopted in response to such
activity, or (3) has been used to restrict such activity.” Hyundai
Am. Shipping Agency, Inc. v. NLRB, 805 F.3d 309, 313-14
(D.C. Cir. 2015).

Whether an employer’s rule could be reasonably construed
to restrict protected activity is an “objective inquiry” in which
“courts focus on the text of the challenged rule.” Quicken
Loans, 830 F.3d at 545-46 (internal quotation marks and
alteration omitted). Any ambiguity in the rule is construed
against the employer. Cintas Corp. v. NLRB, 482 F.3d 463,
468 n.2 (D.C. Cir. 2007) (citing Lafayette Park Hotel, 326
NLRB 824, 828 (1998)). “[T]he mere maintenance of a rule
likely to chill section 7 activity, whether explicitly or through
reasonable interpretation, can amount to an unfair labor
practice even absent evidence of enforcement of the rule by the
employer.” Quicken Loans, 830 F.3d at 546 (quoting
Guardsmark, LLC v. NLRB, 475 F.3d 369, 379 (D.C. Cir.
2007)) (internal quotation marks omitted). Maintaining a rule
that is reasonably likely to chill Section 7 activity is an unfair
labor practice unless the employer “present[s] a legitimate and
substantial business justification for the rule, outweighing the
adverse effect on the interests of employees.” Hyundai, 805
F.3d at 314.

On review, the Board’s determinations are “entitled to
considerable deference.” Adtranz ABB Daimler-Benz Transp.,
N.A., Inc. v. NLRB, 253 F.3d 19, 25 (D.C. Cir. 2001). The
Court will uphold the Board’s decision unless it “relied upon
findings that are not supported by substantial evidence, failed
to apply the proper legal standard, or departed from its
precedent without providing a reasoned justification for doing
so.” E.I. Du Pont De Nemours & Co. v. NLRB, 682 F.3d 65,
67 (D.C. Cir. 2012).
 8
III. Analysis

A. Confidentiality Agreement. The Board’s unanimous
conclusion that Banner’s Confidentiality Agreement struck at
the heartland of Section 7 activity without adequate
justification withstands our deferential review.

Banner’s Confidentiality Agreement was overbroad. It
explicitly directed employees not to discuss co-workers’
“[p]rivate employee information (such as salaries, disciplinary
action, etc.)” unless the information was “shared by the
employee.” J.A. 86. Banner insists that the Agreement was
most reasonably read as limited to information Banner was
entitled to suppress, and could not be “reasonably construed by
employees to restrict § 7 activity.” Hyundai, 805 F.3d at 313.
But the ALJ squarely held, and the Board affirmed, that
Banner’s Agreement “could reasonably be construed to
prohibit Section 7 activity.” 358 NLRB at 814.

Our precedents on employees’ Section 7 rights to discuss
employment terms and conditions support the Board’s
decision. We have approved a hospital’s rule barring
discussion of “confidential information concerning patients or
employees,” because a reasonable employee would not assume
that the term “confidential information” included information
about the terms and conditions of employment—the free
exchange of which is “essential[] to successful self-
organizing.” Cmty. Hosps. of Cent. California v. NLRB, 335
F.3d 1079, 1088-89 (D.C. Cir. 2003). But we have disapproved
a hospital’s confidentiality rule where it more broadly
prohibited discussion of “[i]nformation concerning patients,
[employees], or hospital operations.” Brockton Hosp. v. NLRB,
294 F.3d 100, 106-07 (D.C. Cir. 2002). At the same time,
“confidential information” cannot itself “be defined so broadly
as to include working conditions.” Double Eagle Hotel &
 9
Casino v. NLRB, 414 F.3d 1249, 1260 (10th Cir. 2005)
(sustaining Board invalidation of policy defining “confidential
information” to include salary information); see also Flex Frac
Logistics, L.L.C. v. NLRB, 746 F.3d 205, 209 (5th Cir. 2014)
(invalidating confidentiality clause encompassing “personnel
information,” which the Board read to cover wage
information).

In the Confidentiality Agreement challenged here, Banner
described “confidential information” as encompassing
“[p]rivate employee information,” including “salaries” and
“disciplinary action.” J.A. 86. Even if a reasonable employee
would not have thought such quintessential Section 7
information was covered by the term “confidential
information” standing alone, Cmty. Hosps., 335 F.3d at 1089,
Banner’s Agreement expressly reached information about
salaries and employee discipline. A reasonable employee
could well understand Banner’s rule to prohibit the very
discussion of terms and conditions of employment that Section
7 protects. That is the sort of overbreadth our precedents
squarely forbid. See, e.g., Cintas, 482 F.3d at 465 (invalidating
policy barring employees from discussing “any information
concerning the company”); Hyundai, 805 F.3d at 314-15
(invalidating policy preventing employees from “disclos[ing]
information or messages” exchanged on the company’s
internal network except to “authorized persons”).

Banner’s Confidentiality Agreement is not salvaged by its
safe harbor allowing employees to discuss information about
salaries and discipline when “shared by the employee” whom
the information concerned. The Board has recognized that
restricting employees’ “use of information innocently
obtained” interferes with Section 7 rights. Labinal, Inc., 340
NLRB 203, 210 (2003). The Confidentiality Agreement’s
permission to discuss information “shared by the employee” is
 10
ambiguous—and hence inadequate to protect employees’ right
to share innocently obtained information—on at least two
fronts.

First, it is not clear with whom the information must be
“shared” in order to be fair game for employee discussion. For
an employee to discuss her co-worker’s unfair working
conditions, would she need to have heard the information
directly from the co-worker, or would it suffice that she heard
the information secondhand? And would she need the co-
worker merely to divulge the information voluntarily, or also
to authorize further dissemination?

Second, it is not clear how Banner’s rule would apply to
situations where information leaked inadvertently, such as
where an employee left a paystub on a widely accessible office
photocopier. See, e.g., Labinal, 340 NLRB at 209-10 (holding
that employee innocently obtained wage information when co-
worker sitting beside her opened a paystub in her line of
vision). The term “shared” in Banner’s Agreement does not
plainly allow discussion of information innocently obtained but
not actively shared; we would not ordinarily say that an
employee “shared” her paystub by leaving it on the copier or
opening it in view of coworkers. In sum, permission to use
information only insofar as it has been “shared” may require
consent to the specific use, yet the Board has held that “[t]o
prohibit one employee from discussing another employee’s pay
without the knowledge and permission of the other employee
muzzles employees who seek to engage in concerted activity
for mutual aid or protection.” Id. at 210. Because a reasonable
employee could interpret Banner’s Confidentiality Agreement
as prohibiting discussion of the working conditions of any
employee who has not expressly authorized the particular
discussion, the Board reasonably found a violation of Section
8.
 11
The Board also reasonably determined that Banner failed
to present “a legitimate and substantial business justification”
for its Confidentiality Agreement outweighing the burden it
imposes on employees. Hyundai, 805 F.3d at 314. The
Agreement is not tailored to Banner’s concededly substantial
interest in protecting patient privacy, see Pet’r Br. 41, because
it is not limited to “[p]atient information,” but separately
identifies “[p]rivate employee information … not shared by the
employee” as “confidential information.” J.A. 86. Neither is
Banner’s Confidentiality Agreement tailored to its asserted
interest in respecting antidiscrimination and privacy laws, such
as by forestalling potential retaliation against employees who
press EEO complaints or complying with the Health Insurance
Portability and Accountability Act of 1996. See Pet’r Br. 41.
As written, the Agreement could chill discussion of
quintessential Section 7 information—including salaries and
discipline—even when such discussion would not conflict with
other applicable laws.

The Board’s remedial order requires Banner to post a
remedial notice “at all facilities where [it] utilizes its
confidentiality agreement.” 362 NLRB No. 137, at *1 n.3. We
defer to the Board on remedial matters unless its order is “a
patent attempt to achieve ends other than those which can fairly
be said to effectuate the policies of the Act.” Petrochem
Insulation, Inc. v. NLRB, 240 F.3d 26, 34-35 (D.C. Cir. 2001)
(quoting Virginia Elec. & Power Co. v. NLRB, 319 U.S. 533,
540 (1943)). Banner objects that the Board lacked evidence
that Banner used the Confidentiality Agreement beyond the
hospital where Navarro worked. But the Agreement itself
contains a “Banner Health” logo and refers to “Banner” and
“BH”; nothing suggests that it applies only at Banner Estrella
Medical Center. J.A. 86. It was within the Board’s “broad
discretionary power” over remedies to order Banner to post a
 12
notice wherever it used the Agreement. Petrochem, 240 F.3d
at 34.

B. Investigative Nondisclosure Policy. The Board also
sanctioned Banner for maintaining a categorical nondisclosure
rule regarding certain types of workplace investigations, but we
deny enforcement of that part of the Board’s Order because the
record lacks substantial evidence that Banner had such a policy.
As recounted above, the Board relied exclusively on the
Interview of Complainant form and Odell’s limited and
equivocal testimony about how and when it was used. The
form, under the header “Introduction for all interviews,” set
forth a scripted nondisclosure request. Odell testified,
however, that she did not in practice request nondisclosure in
“all” interviews, nor did she make any such request of Navarro.
See Tr. at 194. Instead, Odell said she would request
nondisclosure only when her investigation required her to
speak to more than one person, id. at 258, and “[j]ust in the
more sensitive situations,” id. at 260. She identified sexual
harassment, hostile work environment, and “[s]uspicion of
abuse” cases as “particular types of investigations … where
[she] may ask someone to keep things confidential.” Id. at 259-
60.

On that evidence, the Board found the Interview of
Complainant form “prescribes a standard ‘Introduction for all
Interviews’” that “directs the investigator” to request
nondisclosure. 362 NLRB No. 137, at *2. The Board
interpreted Odell’s testimony that she requested nondisclosure
“[j]ust in the more sensitive situations,” Tr. at 260, as
establishing that she “request[ed] confidentiality in any
investigation into alleged sexual harassment, hostile work
environment claim, charge of abuse, or similar alleged
misconduct.” 362 NLRB No. 137, at *6. The Board further
found no evidence that Odell “made any individualized
 13
determinations that confidentiality was necessary to maintain
the integrity of any particular investigation or any particular
interview.” Id. at *2. That categorical approach, the Board
concluded, violated its precedents placing the burden on the
employer to determine, on a “case-by-case” basis, that
confidentiality is necessary “based on objectively reasonable
grounds for believing that the integrity of the investigation will
be compromised without confidentiality.” Id. at *5 (citing
Hyundai Am. Shipping Agency, Inc., 357 NLRB 860, 874
(2011); Phoenix Transit Sys., 337 NLRB 510 (2002); Desert
Palace, Inc., 336 NLRB 271 (2001)).

Even under our deferential standard of review, the Board
made unwarranted logical leaps that the evidence cannot fairly
support. Odell was never asked whether her approach was
categorical in the types of investigations to which she referred,
or whether she instead requested confidentiality only when she
saw a case-specific need for it. In particular, Odell’s testimony
identifying sexual harassment and other types of cases where
she “may ask someone to keep things confidential” did not
suggest that she necessarily did so in all such cases. Tr. at 259-
60. Nor does her statement that she requested nondisclosure
“[j]ust in the more sensitive situations,” id. at 260, mean she
did so without reference to the individual features of a sensitive
investigation. As Banner points out, “a few specific questions”
could have established whether Odell routinely requested
confidentiality “whenever she conducted certain types of
investigations.” Pet’r Reply Br. 1.

The Board is surely entitled to draw “reasonable
inferences” from the evidence, Tasty Baking Co. v. NLRB, 254
F.3d 114, 124-25 (D.C. Cir. 2001), but here Odell was simply
never asked key questions to establish whether, in practice,
Banner had a policy of categorically requesting nondisclosure
regarding any particular kind of investigation. Banner’s
 14
counsel acknowledged at oral argument that the nondisclosure
script, standing alone, could well chill workers’ protected
communications about the terms and conditions of
employment—but only if they were aware of its contents. See
Oral Arg. at 12:27-12:58. As it stands, the record is devoid of
evidence that any employee was aware of the form or the
content of its nondisclosure script. Odell’s testimony
suggested that, despite the header, Banner’s policy was not to
request nondisclosure in “all investigations.” But her
testimony was simply too terse and unclear to sustain the
Board’s determination that Banner had a policy of categorically
requesting nondisclosure of the entire subset of investigations
that addressed “alleged sexual harassment, hostile work
environment claim, charge of abuse, or similar alleged
misconduct.” 362 NLRB No. 137, at *6.

Because the lack of substantial evidence dooms this part
of the Board’s Order, we need not address Banner’s (or
amici’s) arguments that the Board failed to balance employees’
Section 7 rights against employers’ interests in nondisclosure
of workplace investigations. Nor need we opine on the Board’s
requirement of a case-by-case approach to justifying
investigative confidentiality. Cf. Hyundai, 805 F.3d at 314
(declining to endorse the Board’s “novel view” but holding that
Hyundai’s rule prohibiting discussion of all matters under
investigation “was so broad and undifferentiated that the Board
reasonably concluded that Hyundai did not present a legitimate
business justification for it”). Finally, Banner’s argument that
the Board violated due process by finding a violation on a
theory not litigated before the ALJ is not properly before us, as
Banner failed to raise it before the Board. See Int’l Ladies’
Garment Workers’ Union v. Quality Mfg. Co., 420 U.S. 276,
281 n.3 (1975). Banner also failed to raise, and thus forfeited,
any argument that the violations the Board found were
insufficiently related to those alleged in Navarro’s charge. See
 15
Parsippany Hotel Mgmt. Co. v. NLRB, 99 F.3d 413, 417-19
(D.C. Cir. 1996); Cmty. Hosps, 335 F.3d at 1088.

***
Banner’s petition for review is granted as to the
investigative nondisclosure policy. The Board’s cross-
application for enforcement is granted as to the Confidentiality
Agreement. The case is remanded to the Board for further
proceedings consistent with this opinion.
So ordered.