### IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

No. 12

- 60752

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 re view of an order by the Nation al 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 Rela tions Act (“NLRA”). The NLRB cross - petitio ns for enforcement of the order. We DENY Flex Frac’s petition for review and ENFORCE the NLRB’s order.

1 F or purpos es of this appeal, we treat Flex Frac Logistics, L.L.C. and Silver Eagle Logistics, L.L.C. as joint employers. United States Court of Appeals Fifth Circuit 

### FILED March 24, 2014 Lyle W. Cayce Clerk Case: 12-60752 Document: 00512570554 Page: 1 Date Filed: 03/24/2014No. 12

- 60752 I. FACTUAL AND PROCEDURAL HISTORY A. Facts Flex Frac is a non

- union trucking company base d in Fort Worth, Texas. F lex Frac relies on its employees as well as independent cont ractors 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 in cludes, 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 co sts, 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 20 10, Flex Frac fired Kathy Lopez and she f iled a charge with the NLRB. T he Acting General Counsel for the Board subsequently is sued a complaint, alleging , inter alia , that Flex Frac promulgated and maintained a rule prohibiting employees from discussing employee wages. 2

2 The complai nt 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 c omplaint. Thus, Lopez’s termination is not currently before us on appeal. 2 Case: 12-60752 Document: 00512570554 Page: 2 Date Filed: 03/24/2014No. 12

- 60752 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 violat ed Section 8(a)(1) of the NLRA because it was overly broad and contained language employees could reasonabl y 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 vio lated 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 enforce ment. II. S TANDARD 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.3 d 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 citat ions omitted). In making this determination, “[w] e may not reweigh the evidence, try the case d e 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 Ci r. 1978) (internal quotation marks and citation omitted).

3 The NLRB delegated its authority to a three

- member panel for this proceeding. 3 Case: 12-60752 Document: 00512570554 Page: 3 Date Filed: 03/24/2014No. 12

- 60752 III. DISCUSSION As an initial matter, we address a belated constitutional challenge raised by Flex Frac regarding the NLRB ’s aut hority to re nder 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 i ts 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. 20 12) (“An appellant abandons all issues not raised and argued in its initial brief on appeal.” (inte rnal quotation marks and citation omitted) )

. Ordinarily, arguments raised for the first time in a reply brief are waived. United States v. Jackson , 426 F.3 d 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, a nother panel of this Court faced a similar issue and concluded that the constitutionality of the Preside nt’s authority to make recess appointments was not a jurisd ictional 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.

4 Case: 12-60752 Document: 00512570554 Page: 4 Date Filed: 03/24/2014No. 12

- 60752 2013)

. We ag ree. 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

- o rganization; forming, joining, and ass isting labor organizations; collective bargaining ; and eng aging “in other concerted activities for the purpose of collective bargaining or other mutua l aid or protection.” 29 U.S.C . § 157. A “workplace rule that for b[ids] the discussion of confidential wage information between employees

. . . patent ly violat e[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 wit hin 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 ri ghts.” Id. at 647. In making this inquiry,

w e “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. W e

5 Case: 12-60752 Document: 00512570554 Page: 5 Date Filed: 03/24/2014No. 12

- 60752 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 F

rac 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 ma de 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 prev ent 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 thems elves 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, incl uding 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 me rely 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 6 Case: 12-60752 Document: 00512570554 Page: 6 Date Filed: 03/24/2014No. 12

- 60752 omitted)). Moreover, “t he 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, 82 5 (1998) (“[T]he appropriate inquiry is whether the rules would reasonably tend to chill employees in the exercise o f their Section 7 rights. Where the rules are likely to have a chi lling effect . . . , the Board may conclude that their maintenance is an u nfair labor practice, even absent evidence of enfor cement.” (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 Great er Fl a . , 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, i n K

- Mart , the employer’s policy stated, “Company business and documents are confidential. Disc losure 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 26 3

– 6 4. 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 7 Case: 12-60752 Document: 00512570554 Page: 7 Date Filed: 03/24/2014No. 12

- 60752 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 de cision in Mediaone . I n Mediaone , a divided panel of the NLRB agreed that an employer’s prohibition against disclosure of “pro prietary information . . . includ[ing] . . . customer and employee information, including organizational charts and databases [and] financial information” would not chill employees in the exercise of their Secti on 7 rights. 340 N

. L

. R

. B

. at 278

– 79 . The NLRB noted that the prohibitions were listed a s 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 Media one , the information was listed as a sub

- set of “intellectual property.” Therefore, employee s would not reasonably understand t he i r wages to be a form of intellectual property. Flex F rac’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 prohib its 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. Therefo re, contrary to Flex Frac’s contentions otherwise, we hold that the NLRB’s order does not contravene its precedent. 4

4 By its terms , the NLRB’s enforcement order acknowledges that the employer is only prohibited from “[p]romulgating and maintaining an overly broad and ambiguous confidentialit y rule that . . . may reasonably be read to prohibit employees from discussing 8 Case: 12-60752 Document: 00512570554 Page: 8 Date Filed: 03/24/2014No. 12

- 60752 IV. CONCLUSION Accordingly, based on the foregoing reasons, we DENY Flex Frac’s petition for revi ew and ENFORCE the NLRB’s orde r.

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 Fr ac 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. 9 Case: 12-60752 Document: 00512570554 Page: 9 Date Filed: 03/24/2014