Flex Frac Logistics, L.L.C. v. Nat'l Labor Relations Bd.

• Decision Date: 24 March 2014
• Docket Number: No. 12–60752.,12–60752.
• Citation: 746 F.3d 205
• Parties: FLEX FRAC LOGISTICS, L.L.C.; Silver Eagle Logistics, L.L.C., Petitioners/Cross–Respondents, v. NATIONAL LABOR RELATIONS BOARD, Respondent/Cross–Petitioner.
• Court: U.S. Court of Appeals — Fifth Circuit

746 F.3d 205

FLEX FRAC LOGISTICS, L.L.C.; Silver Eagle Logistics, L.L.C., Petitioners/Cross–Respondents,

v.NATIONAL LABOR RELATIONS BOARD, Respondent/Cross–Petitioner.

No. 12–60752.

United States Court of Appeals,Fifth Circuit.

March 24, 2014.

Scott Edmund Hayes, Esq., Vincent Lopez Serafino Jenevein, P.C., Dallas, TX, for Petitioners/Cross–Respondents.

Linda Dreeben, Esq., Deputy Associate General Counsel, Jared David Cantor, Attorney, Martha Elaine Kinard, Esq., Director, Robert James Englehart, Supervisory Attorney, National Labor Relations Board, Beth S. Brinkmann, Esq., Benjamin M. Shultz, U.S. Department of Justice, Washington, DC, for 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.

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

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.³Flex Frac Logistics LLC & Silver Eagle Logistics LLC, Joint Employers & Kathy Lopez, 358 NLRB 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).

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.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 NLRB 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 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 NLRB 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...