NLRB Dismisses Complaint That Employees’ Rights Were Violated When They Were Fired for Violating Employer’s Instructions Not to Discuss Internal Investigation

Volume 1, Issue 4
Winter 2001

On September 28, 2001, the National Labor Relations Board ("NLRB") handed Caesars Palace and KZ&A a hard-fought victory in a case involving two employees who contended their rights, under Section 7 of the National Labor Relations Act, were violated after they repeatedly violated their employer's instructions not to discuss with other employees a confidential internal drug investigation. Caesars Palace conducted an internal investigation prompted by an anonymous letter that (a) accused an unnamed slot technician of dealing drugs on property, stealing company property, and threatening the lives of fellow employees, and (b) alleged that two supervisors covered up this activity and retaliated against employees who complained about the slot technician. The letter named 11 slot technicians who could substantiate the allegations. Caesars began an internal investigation, which included interviews with those named in the letter, including slot technicians Louis Louft and Richard Zollo. Each interviewee received strict instructions not to discuss the investigation with anyone in or out of the workplace; none objected at the time to the confidentiality requirement or asked for clarification. In the days immediately following the interview, both employees began discussing the investigation with other employees. Both Zollo and Louft were discharged; other employees who violated the confidentiality directive received less severe discipline. An NLRB Administrative Law Judge (ALJ) found a violation of Section 7 of the NLRA, finding (a) the employees had a right to discuss discipline or disciplinary investigations involving other employees, (b) that the rule prohibiting discussion of the ongoing drug investigation "adversely affected" exercise of that right, and (c) the discharge violated Section 8(a)(1), and ordered the employees reinstated.

The NLRB, however, disagreed. While agreeing that employee Section 7 rights encompass the right to discuss discipline or disciplinary investigations involving other employees, the Board found that Caesars' "substantial and legitimate business justification" for the confidentiality rule outweighed the employees' rights. In doing so, the Board focused upon the reasons for adoption of the rule: (a) the investigation involved allegations of management cover-up, possible management retaliation, and threats of violence; and (b) the confidentiality rule would "ensure that witnesses were not put in danger, that evidence would not be destroyed, and that testimony was not fabricated" (as would be facilitated if the interviewees are discussing questions, information, etc.). The NLRB also disagreed with the ALJ's finding that, because some employees were not discharged, the asserted confidentiality interest was "illegitimate or insubstantial."

This is a significant development. Had the NLRB adopted the ALJ's construction of the law, the ability of employers to conduct internal investigations in a confidential manner would have been significantly hampered because employees would be able to just ignore their employers' typical instruction, during investigations, not to discuss the investigation or interview. This would have impacted many types of investigations, from drug and theft investigations to sexual harassment complaints. After Desert Palace, employers must still prove their "substantial and legitimate interest" in maintaining confidentiality in each individual case, but the Board's decision strikes the proper balance by helping to ensure employers can conduct an appropriate investigation without interference from employees desiring to taint the investigatory process (or worse), or an activist NLRB bent on protecting employees who do so. At the same time, however, the Board could have gone further to give employers guidance by better defining the proper parameters of confidentiality instructions. To some extent, this decision leaves employers guessing as to the scope of what is permissible. To best position the company in this situation, confidentiality instructions must be narrowly tailored to clearly provide that confidentiality must be maintained for the "duration of the investigation", and when in doubt about the duration to confer with the investigator or interviewer. KZ&A is pleased with this decision, and offers its congratulations to its client, Caesars Palace.

Desert Palace, Inc. d/b/a Caesars Palace v. Richard Zollo. Case No. 28-CA-1420, 336 NLRB No. 19 (September 28, 2001).

KZA Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.