As a result, the NLRB has temporarily suspended the implementation of changes to its representation case process and has advised regional directors to revert to their previous practices for election petitions starting today.

The NLRB could appeal this ruling, or could remedy the situation by re-enacting the rule with a three member quorum.  It is unlikely that this snap election issue is dead.

Having gone into effect on April 30, 2012, the rule's primary objective was to substantially reduce the period of time between the filing of a union representation petition and an election. Under the rule, employers would no longer be entitled to a hearing before the election on most issues, and even in cases where a hearing took place, the election would take place more quickly after the hearing than under the prior system. Approximately 150 election petitions were filed during the small window in which the new rule was in effect.

For more information, please contact a member of the Employment & Labor Group.

Important Notice: This advisory has been prepared by Varnum for informational purposes and does not consititute legal advice. Copyright © 2012 Varnum LLP. All Rights Reserved.

Important Notice: This advisory has been prepared by Varnum for informational purposes and does not consititute legal advice. Copyright © 2012 Varnum. All Rights Reserved.

• The General Counsel continues to find employer policies and work rules to be unlawfully broad when employees may reasonably view them as prohibiting conduct protected under the Act.  For example, work rules or policies prohibiting "insubordination or other disrespectful conduct" and "inappropriate conversation" were held to be unlawfully broad because employees might think that they cannot join together to complain about their terms and conditions of employment, which is protected activity under the Act. 
• Importantly, the General Counsel's Office rejected a "savings clause" in a social media policy designed to prevent the policy from being overly broad.  The employer's social media policy stated that "it would not be interpreted or applied so as to interfere with" employee rights under the Act.  The General Counsel found this language did not "save" the policy from being overbroad because an employee could not reasonably be expected to know that the clause would apply to discussions the employer deems inappropriate under the policy.  In light of the General Counsel's approach, employers should narrowly tailor their social media policies rather than attempt to use "savings" language to fix overly broad policies.
• On the other hand, the General Counsel found an employer's "amended" social media policy to be lawful because it prohibited conduct that was "vulgar, obscene, threatening, intimidating, harassing, or a violation of the Employer's workplace policies against discrimination, harassment, or hostility on account of age, race, religion, sex, ethnicity, nationality, disability, or other protected class, status, or characteristic."  The General Counsel found the policy lawful because employees would not reasonably construe the policy's language to prohibit conduct protected by the Act.
• Individual gripes by employees are not protected activity.  Thus, the General Counsel found in several cases that employers did not violate the Act by discharging employees who complained about their employment on social media pages because they were acting solely on their own behalf rather than on behalf of themselves and other employees.
• Employees can go overboard in their criticisms, however, and lose the protection of the Act.  Language that is “opprobrious," or sufficiently “disloyal, reckless, or maliciously untrue” may remove the activity from protection, depending upon the circumstances.

In addition to the NLRB's attention to employee activity, courts and arbitrators are increasingly addressing social media.  Here are just a few recent examples:

• A federal district court in Illinois ruled that an employee, a marketing director for an interior design firm, could proceed with federal Stored Communications Act and Lanham Act claims against her employer based on her co-workers' unauthorized use of her Facebook and Twitter accounts to promote the employer.  Maremont v. Susan Fredman Design Grp., No. 10C 7811 (N.D. Ill. Dec. 7, 2011).
• A federal court in Washington ruled that a trial was necessary to determine whether an employee, who had been on leave for treatment of depression, was unlawfully discharged due to her suicidal comments made via social media.  Peer v. F5 Networks, Inc., No. C11-0879-JCC (March 19, 2012).  
• An arbitrator denied a grievance challenging the discharge of a Head Start teacher who started a closed Facebook page to "gripe" about employees, parents, and students at the Head Start program.  Although the members of the invite-only group complained about work, they were also exceedingly profane, many of the posts were not connected to working conditions, and, most importantly, there was "nothing about the conversations that would lead to the conclusion that [the employees] were seeking to band together to take action to address their workplace concerns."  Vista Neuvas Head Start, 129 LA 1519 (VanDagens, 2011).
• A federal court in California held that a mobile news website company sufficiently stated claims for negligent and intentional interference with prospective economic advantage by alleging that a former employee appropriated a company Twitter account that drove traffic to its website.  PhoneDog v. Kravitz, No. C 11-03474 MEJ (N.D. Cal. Jan. 30, 2012).
• An NLRB administrative law judge recently ruled that a "Jimmy John's" franchisee violated the Act when an assistant manager posted the telephone number of a known union supporter on an anti-union Facebook page and encouraged others to "text" him to let him know "how they feel."  The ALJ believed this post amounted to an invitation for other anti-union co-workers to harass the employee in retaliation for this union activity.  Jimmy John's, 18-CA-19707 (April 20, 2012).

Employers must act carefully when issuing disciplinary action in connection with social media activity.  Seeking legal advice is important because, as shown above, employee social media activity implicates numerous areas of employment law. 

Michigan law prohibits starting a foreclosure by advertisement if a lawsuit has already been filed to recover payment of "the debt" secured by the mortgage.  Many have understood this law to mean that while a mortgagee may not file a lawsuit to recover a debt secured by a mortgage and at the same time foreclose the mortgage by advertisement, the mortgagee could simultaneously file a lawsuit against a guarantor based on a guaranty of the debt while at the same time foreclosing the mortgage by advertisement.  However, the recent Court of Appeals decision held that a bank could not foreclose by advertisement on a mortgage when at the same time it had filed suit against a guarantor.

The Court based its decision on the fact that the underlying loan documents contained language which defined "the debt" to include any guarantees, and held the bank violated Michigan law by foreclosing the mortgage by advertisement at the same time it was suing the guarantors.  The Court looked at the entire loan package, and not just the mortgage to reach its decision.  As a result, the Court held that the bank could not proceed with the foreclosure by advertisement.  Under the Court's ruling, mortgagees may not foreclose a mortgage by advertisement while at the same time filing suit against guarantors.

Previously set to take effect on April 30, 2012, and already delayed by the NLRB from a January 31, 2012 effective date, the rule recently suffered two major setbacks. On March 2, 2012 the U.S. District Court for the District of Columbia invalidated the penalty provisions of the rule, while upholding the posting requirement itself. However, on April 13, 2012, the U.S. District Court for the District of South Carolina held that the NLRB lacked the authority to require employers to post notices in the workplace informing employees of their rights under the National Labor Relations Act (NLRA) and struck down the rule in its entirety. 

The Court of Appeals ordered the rule enjoined until it has had an opportunity to consider the merits of the case. Oral arguments are scheduled to take place in September 2012.

Consequently, employers no longer have to implement the Notice Posting at their workplace by the April 30, 2012 effective date as the NLRB's regional offices will not implement the rule until the matter has been decided by the Court of Appeals.

• General Solicitation and Advertising Allowed. Smaller companies that need to raise capital often rely on Rule 506 of Regulation D, a "private offering" exemption from the requirement to register securities offerings with the Securities and Exchange Commission ("SEC") and state securities agencies. Prior to the JOBS Act, no issuer could engage in any form of general solicitation or advertising with respect to the securities being offered. The JOBS Act eliminates this ban under Rule 506, provided the issuer takes steps to ensure that all purchasers are "accredited investors."
• Crowdfunding Exemption. "Crowdfunding" is a way of describing a capital-raising strategy in which groups of people pool their capital, often composed of small individual contributions, to support a particular goal or organization. The JOBS Act creates a new exemption to allow private companies to raise up to $1 million within any 12-month period, with each investor being allowed to invest up to a certain amount. Numerous conditions apply, including a requirement that a crowdfunding transaction be conducted through a broker or a "funding portal" registered with the SEC, and that participating brokers and funding portals provide certain investor education materials. Issuers relying on this exemption must also register with the SEC and provide certain information at the time of the offering as well as annual financial statements following the offering.
• Higher Shareholder Thresholds for Public Reporting. Prior to the JOBS Act, any company with more than $10 million in assets was required to register as a public company with the SEC if any class of its equity securities was held by 500 or more persons. The JOBS Act raises this threshold to 2,000 shareholders, so long as no more than 499 shareholders are not "accredited investors." (Slightly different thresholds apply for banks and bank holding companies.) For purposes of this calculation, employee-shareholders who received their securities in an exempt transaction pursuant to an employee compensation plan are excluded. Upon the SEC's adoption of rules to implement the crowdfunding exemption described above, holders of crowdfunded securities also will be excluded.
• Expanded Mini-Registration under Regulation A. Regulation A is a scaled-back form of registration (or "mini-registration") with less disclosure and regulatory requirements than a full registered offering under federal law. Prior to the JOBS Act, private companies could raise up to $5 million under Regulation A. The JOBS Act requires the SEC to amend Regulation A (or create a new exemption similar to Regulation A) to allow private companies to raise up to $50 million within any 12-month period, provided the issuer files audited financial statements with the SEC annually and complies with certain other conditions (the full extent of which will be confirmed in the SEC's new rules). However, unless the securities are offered and sold on a national securities exchange or to "qualified purchasers," this provides an exemption under federal law only, so many issuers must still comply with (or find a suitable exemption from) registration requirements under state securities laws.

The JOBS Act amended other aspects of the federal securities laws, including those pertaining to accessing public markets via an IPO and phasing-in certain disclosure requirements applicable to public companies for qualifying businesses. Contact your Varnum attorney for more information.