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NLRB Nixes Employer Policy Prohibiting Employee Conflicts of Interest

    Client Alerts
  • July 03, 2015
Many employers publish Conflicts of Interest policies that prohibit employees from competing against the company while employed, holding a financial interest in a competitor or vendor, or doing business on behalf of the company with a relative. Last month, the National Labor Relations Board issued a decision cautioning employers against adopting conflicts policies that fail to clearly define what actions are prohibited.

In Remington Lodging & Hospitality, LLC, a union brought an unfair labor practice charge against the hotel, alleging that its policy prohibiting employee conflicts of interest violates Section 7 of the NLRA. The union and NLRA counsel contended that the policy would be read by employees to prohibit them from taking any position or action adverse to the employer’s potential interests, including organizing, informational picketing, etc. The NLRB majority agreed, declaring the policy to be overbroad and illegal on its face.

The hotel and the dissenting Board member argued that no employee would interpret the policy to prohibit collective bargaining or concerted activity rights. They noted that such policies are universally known by employees to refer to taking actions for personal financial gain against the interests of the employer.

Employers should be able to avoid legal problems raised by this decision by clearly defining in their policies what constitutes a prohibited conflict of interest. Although not addressed by the NLRB in its decision, employers could also include a disclaimer in the Conflicts of Interest policy making clear that it is not intended nor will it be interpreted to interfere with employee Section 7 rights.