In a decision issued by the National Labor Relations Board on September 7, 2012, the Board ruled on its first employer social media policy.  It found a Costco policy which prohibited defamatory statements to be unlawful.  In Costco Wholesale Corporation and United Food and Commercial Workers Union, Local 371, No. 34-CA-012421,the Board reviewed an employee handbook which contained a prohibition on electronic postings that "damage the Company, defame any individual or damage any person's reputation."  

The Board found that the policy violates the National Labor Relations Act (NLRA) because it could deter employees from engaging in Section 7 protected communications critical of Costco, and, therefore, constitutes an unfair labor practice under Section 8(a)(1).  It is an unfair labor practice for an employer to interfere with, restrain or coerce employees in the exercise of their rights guaranteed in Section 7. Under Section 7, employees have the right to self-organize, to join unions and to engage in “other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”  The Board determined that Costco's policy would "chill" the employees in the exercise of Section 7 rights.