Flex Frac Logistics, L.L.C. v. National Labor Relations Board

Case: 12-60752 Document: 00512570554 Page: 1 Date Filed: 03/24/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
No. 12-60752 March 24, 2014
Lyle W. Cayce
Clerk
FLEX FRAC LOGISTICS, L.L.C.; SILVER EAGLE LOGISTICS, L.L.C.,
Petitioners/Cross-Respondents,
v.
NATIONAL LABOR RELATIONS BOARD,
Respondent/Cross-Petitioner.
Petition for Review and Cross Petition for Enforcement
of an Order of the National Labor Relations Board
Before STEWART, Chief Judge, and HIGGINBOTHAM and JONES, Circuit
Judges.
CARL E. STEWART, Chief Judge:
Flex Frac Logistics, L.L.C. and Silver Eagle Logistics, L.L.C.
(collectively, “Flex Frac”) 1 petition for review of an order by the National Labor
Relations Board (“NLRB”) holding that Flex Frac’s employee confidentiality
policy is an unfair labor practice in violation of Section 8(a)(1) of the National
Labor Relations Act (“NLRA”). The NLRB cross-petitions for enforcement of
the order. We DENY Flex Frac’s petition for review and ENFORCE the NLRB’s
order.
For purposes of this appeal, we treat Flex Frac Logistics, L.L.C. and Silver Eagle
1
Logistics, L.L.C. as joint employers.
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I. FACTUAL AND PROCEDURAL HISTORY
A. Facts
Flex Frac is a non-union trucking company based in Fort Worth, Texas.
Flex Frac relies on its employees as well as independent contractors to deliver
frac sand to oil and gas well sites. The rates Flex Frac charges its customers
are confidential.
Each Flex Frac employee is required to sign a document which includes
a confidentiality clause. The clause reads as follows:
Confidential Information
Employees deal with and have access to information that must
stay within the Organization. Confidential Information includes,
but is not limited to, information that is related to: our customers,
suppliers, distributors; Silver Eagle Logistics LLC organization
management and marketing processes, plans and ideas, processes
and plans, our financial information, including costs, prices;
current and future business plans, our computer and software
systems and processes; personnel information and documents, and
our logos, and art work. No employee is permitted to share this
Confidential Information outside the organization, or to remove or
make copies of any Silver Eagle Logistics LLC records, reports or
documents in any form, without prior management approval.
Disclosure of Confidential Information could lead to termination,
as well as other possible legal action.
B. Procedural History
In 2010, Flex Frac fired Kathy Lopez and she filed a charge with the
NLRB. The Acting General Counsel for the Board subsequently issued a
complaint, alleging, inter alia, that Flex Frac promulgated and maintained a
rule prohibiting employees from discussing employee wages. 2
2 The complaint also alleged that Flex Frac unlawfully interfered with or restrained
Lopez’s Section 7 rights when it terminated her; however, the NLRB severed and remanded
that portion of the complaint. Thus, Lopez’s termination is not currently before us on appeal.
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The administrative law judge (“ALJ”) found that although there was no
reference to wages or other specific terms and conditions of employment in the
confidentiality clause, the clause nonetheless violated Section 8(a)(1) of the
NLRA because it was overly broad and contained language employees could
reasonably interpret as restricting the exercise of their Section 7 rights. In a
split decision, the NLRB affirmed the ALJ’s ruling that Flex Frac’s
confidentiality clause violated Section 8(a) of the NLRA. 3 Flex Frac Logistics
LLC & Silver Eagle Logistics LLC, Joint Employers & Kathy Lopez, 358
N.L.R.B. No. 127 (2012). Thereafter, Flex Frac filed its petition for review, and
the NLRB filed a cross-petition for enforcement.
II. STANDARD OF REVIEW
We review the NLRB’s legal conclusions de novo and its “factual findings
under a substantial evidence standard.” Sara Lee Bakery Grp., Inc. v. NLRB,
514 F.3d 422, 428 (5th Cir. 2008). “Substantial evidence is that which is
relevant and sufficient for a reasonable mind to accept as adequate to support
a conclusion. It is more than a mere scintilla[] and less than a preponderance.”
El Paso Elec. Co. v. NLRB, 681 F.3d 651, 656 (5th Cir. 2012) (emphasis,
internal quotation marks, and citations omitted). In making this
determination, “[w]e may not reweigh the evidence, try the case de novo, or
substitute our judgment for that of the [NLRB], even if the evidence
preponderates against the [NLRB’s] decision.” Id. at 656–57 (internal
quotation marks and citation omitted). “Only in the most rare and unusual
cases will an appellate court conclude that a finding of fact made by the [NLRB]
is not supported by substantial evidence.” Merchs. Truck Line, Inc. v. NLRB,
577 F.2d 1011, 1014 n.3 (5th Cir. 1978) (internal quotation marks and citation
omitted).
3 The NLRB delegated its authority to a three-member panel for this proceeding.
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III. DISCUSSION
As an initial matter, we address a belated constitutional challenge raised
by Flex Frac regarding the NLRB’s authority to render the decision currently
before us. In its reply brief, Flex Frac argued that the NLRB’s decision was
invalid because the President’s appointment of two members of the panel was
unconstitutional. According to Flex Frac, the President lacked the authority
to make putative recess appointments when the U.S. Senate was not in recess
and the vacancies did not occur during an intersession recess. Because two
members of the three-member panel were not validly appointed, Flex Frac
contended that the NLRB did not have the quorum necessary to issue its
decision.
We decline to address the merits of Flex Frac’s constitutional argument
and instead hold that Flex Frac waived its constitutional challenge by failing
to raise it in its initial brief. See In re Rodriguez, 695 F.3d 360, 365 n.4 (5th
Cir. 2012) (“An appellant abandons all issues not raised and argued in its
initial brief on appeal.” (internal quotation marks and citation omitted)).
Ordinarily, arguments raised for the first time in a reply brief are waived.
United States v. Jackson, 426 F.3d 301, 304 n.2 (5th Cir. 2005). Moreover,
appellate courts shall not consider objections that have not been raised before
the NLRB “unless the failure or neglect to urge such objection shall be excused
because of extraordinary circumstances.” 29 U.S.C. § 160(e). Flex Frac argues
that we should nevertheless consider its belated constitutional challenge
because it implicates our jurisdiction. However, another panel of this Court
faced a similar issue and concluded that the constitutionality of the President’s
authority to make recess appointments was not a jurisdictional issue it must
consider, especially considering that the challenge was not raised during the
parties’ initial briefing. D.R. Horton, Inc. v. NLRB, 737 F.3d 344, 351 (5th Cir.
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2013). We agree. Accordingly, we proceed to address Flex Frac’s remaining
arguments.
Flex Frac argues that the NLRB’s order should be set aside because it
was unreasonable, not supported by substantial evidence, and inconsistent
with precedent. Under Section 8(a)(1) of the NLRA, it is “an unfair labor
practice for an employer . . . to interfere with, restrain, or coerce employees in
the exercise of the rights guaranteed in section 157 of this title.” 29 U.S.C. §
158. These rights include self-organization; forming, joining, and assisting
labor organizations; collective bargaining; and engaging “in other concerted
activities for the purpose of collective bargaining or other mutual aid or
protection.” 29 U.S.C. § 157.
A “workplace rule that forb[ids] the discussion of confidential wage
information between employees . . . patently violate[s] section 8(a)(1).” NLRB
v. Brookshire Grocery Co., 919 F.2d 359, 363 (5th Cir. 1990). When
determining whether a workplace rule violates Section 8(a)(1), we must first
decide “whether the rule explicitly restricts activities protected by Section 7.”
Lutheran Heritage Village-Livonia, 343 N.L.R.B. 646, 646 (2004). If the
restriction is not explicit, a workplace rule violates Section 8(a)(1) when it falls
within one of the following categories: “(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. at 647. In making this inquiry,
we “must refrain from reading particular phrases in isolation.” Id. at 646.
Moreover, we may not presume that a workplace rule impermissibly interferes
with employees’ right to exercise their Section 7 rights. Id. The ALJ found,
and the parties do not dispute, that the rule does not explicitly restrict Section
7 activities. The parties also agree that the second category is not at issue. We
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therefore limit our discussion to whether employees would reasonably construe
Flex Frac’s confidentiality provision to prohibit Section 7 activity.
Flex Frac’s contention that the NLRB’s interpretation of the
confidentiality clause was unreasonable is without merit. As the NLRB noted,
the list of confidential information encompasses “financial information,
including costs[, which] necessarily includes wages and thereby reinforces the
likely inference that the rule proscribes wage discussion with outsiders.” Flex
Frac Logistics, 358 N.L.R.B. No. 127 at 3. The confidentiality clause gives no
indication that some personnel information, such as wages, is not included
within its scope. See Cintas Corp. v. NLRB, 482 F.3d 463, 469 (D.C. Cir. 2007)
(“[T]he Company has made no effort in its rule to distinguish section 7
protected behavior from violations of company policy . . . .”).
Flex Frac’s argument that the NLRB’s decision is not supported by
substantial evidence fails. The confidentiality clause’s express terms prevent
discussion of personnel information outside the company, and Flex Frac
presents no evidence that its non-management employees discussed their
wages with non-employees. Rather, Flex Frac points to evidence that its
employees discuss wages amongst themselves and its management and
recruiters discuss wage information with current and prospective employees.
Thus, Flex Frac’s evidence does not support the point it wishes to prove: that
employees were free to discuss terms and conditions of employment, including
wages, outside the company.
Flex Frac also argues that its employees did not interpret the
confidentiality provision to restrict their Section 7 rights; however, the actual
practice of employees is not determinative. See id. at 467 (“The Board is merely
required to determine whether employees would reasonably construe the
[disputed] language to prohibit Section 7 activity and not whether employees
have thus construed the rule.” (internal quotation marks and citation
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omitted)). Moreover, “the Board need not rely on evidence of employee
interpretation consistent with its own to determine that a company rule
violates section 8 of the Act.” Id. Nor is the employer’s enforcement of the rule
determinative. See Lafayette Park Hotel, 326 N.L.R.B. 824, 825 (1998) (“[T]he
appropriate inquiry is whether the rules would reasonably tend to chill
employees in the exercise of their Section 7 rights. Where the rules are likely
to have a chilling effect . . . , the Board may conclude that their maintenance
is an unfair labor practice, even absent evidence of enforcement.” (internal
footnote omitted)).
We are also unpersuaded by Flex Frac’s argument that the NLRB’s
decision conflicts with its decisions in Lafayette Park Hotel, K-Mart, 330
N.L.R.B. 263 (1999), and In re Mediaone of Greater Fla., Inc., 340 N.L.R.B. 277
(2003). In Lafayette Park Hotel, the employer promulgated “standards of
conduct” for its employees, including a statement that it was unacceptable to
“[d]ivulg[e] Hotel-private information to employees or other individuals or
entities that are not authorized to receive that information.” 326 N.L.R.B. at
824. The rule failed to define “hotel-private information.” Id. at 826. A split
panel held that employees “reasonably would understand that the rule is
designed to protect that interest rather than to prohibit the discussion of their
wages.” Id. at 826. Likewise, in K-Mart, the employer’s policy stated,
“Company business and documents are confidential. Disclosure of such
information is prohibited.” 330 N.L.R.B. at 263. The NLRB found this
language to be similar to the language in Lafayette Park Hotel and, thus,
dismissed the complaint. Id. at 263–64.
Contrary to Flex Frac’s assertion, its confidentiality provision is not
similar to the rules in Lafayette Park Hotel and K-Mart. There is a substantial
difference between “Hotel-private information” and “company business and
documents” on the one hand and “personnel information” on the other. By
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specifically identifying “personnel information” as a prohibited category, Flex
Frac has implicitly included wage information in its list, especially in light of
its prohibition against disclosing costs.
Moreover, the NLRB’s decision here does not conflict with its decision in
Mediaone. In Mediaone, a divided panel of the NLRB agreed that an
employer’s prohibition against disclosure of “proprietary information . . .
includ[ing] . . . customer and employee information, including organizational
charts and databases [and] financial information” would not chill employees in
the exercise of their Section 7 rights. 340 N.L.R.B. at 278–79. The NLRB noted
that the prohibitions were listed as examples of “intellectual property,” and
thus employees who read the rule as a whole would not believe it extended to
terms and conditions of employment. Id. at 279.
Mediaone is distinguishable from the confidentiality provision at issue
here. In Mediaone, the information was listed as a sub-set of “intellectual
property.” Therefore, employees would not reasonably understand their wages
to be a form of intellectual property. Flex Frac’s confidentiality provision
contains no limitation on the type of “personnel information” that is prohibited.
Instead, it is a part of the larger category of “confidential information.”
Flex Frac’s remaining attempts to justify its confidentiality provision are
equally unavailing. Flex Frac contends that its rule prohibits only disclosure
of confidential personnel information, not all personnel information; however,
it fails to point to any language making this distinction. Moreover, Flex Frac
defines confidential information as including personnel information.
Therefore, contrary to Flex Frac’s contentions otherwise, we hold that the
NLRB’s order does not contravene its precedent. 4
4By its terms, the NLRB’s enforcement order acknowledges that the employer is only
prohibited from “[p]romulgating and maintaining an overly broad and ambiguous
confidentiality rule that . . . may reasonably be read to prohibit employees from discussing
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IV. CONCLUSION
Accordingly, based on the foregoing reasons, we DENY Flex Frac’s
petition for review and ENFORCE the NLRB’s order.
wages or other terms and conditions of employment.” The order does not impair the majority
of the company’s confidentiality policy. Further, the order does not prevent Flex Frac from
redrafting its policy to maintain confidentiality for employee-specific information like social
security numbers, medical records, background criminal checks, drug tests, and other similar
information.
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