The National Labor Relations Board recently issued a complaint against the United States Postal
Service alleging that USPS failed to furnish information and
bargain over its response to a data breach that compromised
sensitive employee information. This case raises the novel question
of whether and under what circumstances an employer must bargain
over its response to a data breach that affects unionized employee
information—and potentially adds one more legal challenge
that employers may face in the event of data breaches.
On November 10, 2014, USPS announced that it had experienced a cyber breach potentially compromising some 800,000 employee records—including names, addresses, dates of birth, and Social Security numbers. USPS offered all affected employees, some of whom were union members, free credit monitoring and fraud insurance services for one year. The American Postal Workers Union filed two charges against USPS in November and December 2014, alleging that USPS "did not give the Union advance notice that would enable it to negotiate over the impacts and effects of the data breach on employees."
In its complaint, the NLRB alleges that USPS failed to bargain collectively and in good faith in violation of sections 8(a)(1) and (5) of the National Labor Relations Act because it failed to furnish certain information that the union requested after the data breach, and it offered unionized employees credit monitoring and fraud insurance services without affording the union an opportunity to bargain regarding those items. As a remedy, citing USPS's "extensive history" of unfair labor practices, the NLRB asks the Board to order USPS to bargain with the union over the effects of a cyber security breach on bargaining unit members, submit progress reports on the bargaining to the region, and pay union negotiators who are also USPS employees for their time spent bargaining over these issues. Notably, however, the complaint does not appear to ask USPS to rescind the credit monitoring and fraud insurance services that USPS provided to protect its employees.
The key issue in this case will be whether USPS had an obligation to bargain with the union over its response to the data breach, at least to the extent that the breach response affected unionized employees. The NLRB alleges that USPS had an obligation to bargain over the "effects of a cyber security breach on the unit" as well as USPS's response in providing no-cost credit monitoring services and fraud insurance to employees. The NLRB alleges that these matters "relate to the wages, hours, and other terms and conditions of employment" and are therefore "mandatory subject[s] for the purposes of collective bargaining." The Board's complaint does not further elaborate on its theory. The case is currently scheduled for a trial on May 11, 2015.
This case has significant implications for unionized employers, given the time-sensitive nature of addressing data breaches. While this case is still developing, employers should be cognizant that their actions following a data breach may now implicate the NLRA, in addition to other laws, and consider the impact of the NLRA in their data breach response planning. Moreover, because data breach responses must generally be swift to be effective, employers with existing unions should consider obtaining sufficient discretion in advance, so that they can act with the speed that breach responses typically require without running the risk of a successful unfair labor practice complaint.
With respect to the first point, each employer should review the types of employee information that it collects and how that information is stored. Electronic systems should have the requisite protections and safety precautions in place to protect against data breaches, as well as technology that detects cyber breaches. Because many general liability insurance policies do not cover cyber events, companies may want to consider other types of insurance to limit risk, including but not limited to cyber breach insurance, third-party/liability coverage, remediation coverage, or risk management coverage. An employer should also develop a response plan to enable it to react to a breach quickly, efficiently, and without significant disturbances to its business. Companies may consider what steps need to be taken for each type of stored data, from confidential employee information to intellectual property.
As to the second point, while it is yet to be seen whether an employer must bargain with a union over any remedial action after a data breach, employers with open contracts, or who are renegotiating contracts soon, should negotiate language that gives them the broadest possible discretion in responding to a data breach affecting employee information, including the right to delay notification of employees at the request of law enforcement. Such language may include certain specific remedies, such as free credit monitoring services, that the employer will agree to provide in the event of a breach, without having to engage in bargaining with the union before implementing the agreed-upon remedy. If the collective bargaining agreement incorporates company policies, the employer should consider adding a data breach protocol to its policies and discussing the policy with the union before a data breach occurs. Employers should also consider how and when they will notify the unions representing their employees of any actions to be taken in response to a breach affecting union members, in order to minimize claims that they failed to provide appropriate information to the unions.
Both employers and unions alike will be paying careful attention to how this case is resolved, but employers can expect that this case will make unions more attuned to the potential issues that arise when a data breach occurs and more likely to use the NLRB as one potential avenue for legal action in the event of a breach.
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