NLRB Establishes New Standard for Determining Lawfulness of Workplace Rules

On August 2, 2023, the National Labor Relations Board (“NLRB”) issued a decision in Stericycle, Inc., 372 NLRB No. 113 (2023), adopting a new legal standard to decide whether an employer’s handbook is facially unlawful under the National Labor Relations Act (“the Act” or “NLRA”). In overruling the standard established in Boeing Co., 365 NLRB No. 154 (2017), the NLRB ruled that employer handbook policies violate Section 7 of the Act if they have a reasonable tendency to dissuade workers from engaging in protected concerted activity.

Section 7 of the Act affords workers not only the right to organize and bargain collectively, but also the right to engage in other “concerted activities,” including the right to take collective action to improve working conditions. Section 8(a)(1) makes it an unfair labor practice for an employer "to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed” in Section 7 of the Act.

Background of NLRB Rulings on Analysis of Workplace Rules

As NLRB views regarding workplace rules are known to change in accordance with changes in the administration, the reversal of the Trump-era Boeing ruling has been anticipated. A brief recount of the recent history of the workplace rules standard provides additional context to this decision:

• In 2004, the Board issued a decision in Lutheran Heritage Village-Livonia, 343 NLRB 646 (2004), in which it held that rules that do not explicitly target workers' Section 7 rights may nonetheless violate the NLRA if workers would "reasonably construe" them to prohibit Section 7 activity.
• In 2017, the Board overruled the Lutheran Heritage standard in the Boeing decision, in which it held, according to its December 14, 2017 press release, that “when evaluating a facially neutral policy, rule or handbook provision that, when reasonably interpreted, would potentially interfere with the exercise of NLRA rights, the Board will evaluate two things: (i) the nature and extent of the potential impact on NLRA rights, and (ii) legitimate justifications associated with the rule.” Under Boeing, a particular workplace rule violated the NLRA if the business justifications were outweighed by the potential impact on an employee’s Section 7 rights.
  
  For additional clarity, the Board in Boeing provided three categories of workplace policies:
  
  (1) Rules that are presumptively lawful to maintain because either (a) under any reasonable interpretation, the rules would not interfere with NLRA rights or (b) because the potential adverse impact on protected rights would be outweighed by justifications for the rules. Under Boeing, rules requiring harmonious interactions and relationships or basic civility standards are generally deemed to fall under Category 1.
  
  (2) Rules that require individualized scrutiny to determine whether they interfere with Section 7 rights and whether any adverse impact is outweighed by legitimate business reasons. Category 2 included more “general” non-disparagement rules.
  
  (3) Rules that are presumptively unlawful to maintain because any legitimate justification for the rules would be outweighed by the chilling effect on NLRA rights. An example of a Category 3 rule would be a rule that prohibits employees from discussing wages or benefits with one another.
  
  Under the Boeing classification scheme, if the General Counsel failed to meet the initial burden of establishing that a reasonable employee would interpret a rule as potentially interfering with the exercise of Section 7 rights, the analysis proceeded no further; the rule was held lawful as falling within Boeing Category 1(a). If the General Counsel established that a reasonable employee would consider the rule to potentially interfere with Section 7 rights, the Board would then balance that potential interference against the employer's legitimate justifications for the rule. When the balance favored the employer's interests, the rule at issue was deemed lawful within Boeing Category 1(b). When the potential interference with Section 7 rights outweighed any possible employer justifications, the rule at issue was deemed unlawful and fit within Boeing Category 3. Finally, in some instances, the Board was not able to draw any broad conclusions about the legality of a particular rule because the context of the rule and the competing rights and interests involved are specific to that rule and that employer. Those rules fit within Boeing Category 2.

The Stericycle Decision

Stericycle overrules Boeing, returning to and clarifying the Lutheran Heritage standard. Under this “new” standard, the General Counsel must prove that a challenged rule has a reasonable tendency to chill employees from exercising their Section 7 rights; if it does so, then the rule is presumptively unlawful. The employee’s perspective of the rule is most relevant to this stage of the analysis. Specifically, the NLRB will interpret the rule from the perspective of the reasonable employee who is “economically dependent on her employer.” The NLRB explained that this is because an “economically dependent” employee is more inclined to interpret an ambiguous rule to prohibit protected activity in which the employee would otherwise engage. Any ambiguity in the rule will be construed against the employer. In other words, a rule is presumptively lawful even if “a contrary, noncoercive interpretation of the rule is also reasonable.”

An employer may rebut this presumption by proving that the rule advances a legitimate and substantial business interest and that the employer is unable to advance that interest with a more narrowly tailored rule. A “narrowly tailored” rule is one that cannot be reasonably read to chill protected rights. Note that the employer’s intent in issuing the rule is not relevant to this analysis. If the employer is able to meet this very high burden, the rule will be found lawful. There is little guidance set forth in the Stericycle decision to demonstrate how an employer may be able to meet its burden.

The Stericycle standard also eliminates the categorical approach under Boeing, explaining that it was problematic because certain rules were always lawful to maintain, without analyzing the specific wording, industry, or workplace. The Stericycle ruling instead emphasizes a case-specific approach. This change eliminates the predictability and clarity for employers under Boeing, whereby an employer had assurance that if a particular workplace rule was in “Category 1,” the rule was lawful under the Act. Now, employers are likely to find it much more difficult to predict whether a given workplace rule is lawful or not, until there are additional rulings in the coming months. Because Stericycle expands upon prior, pre-Boeing decisions, however, we can look to decisions under Lutheran Heritage and its progeny for guidance. Under Lutheran Heritage, certain policies were generally deemed unlawful under the Act – such as workplace civility rules (i.e. those prohibiting employees from using malicious statements toward the employer, or those requiring employees to behave and cooperate in a “professional manner”), and rules prohibiting loitering on the premises while off-duty. Again, this represents a departure for employers from the last six years under Boeing, where similar civility policies were deemed presumptively lawful.

Takeaways

The NLRA applies to both unionized and non-unionized workplaces.  Therefore, in light of this ruling, all employers should scrutinize their employee handbooks and policies with a careful eye towards whether any workplace rules may be interpreted as chilling rights protected by the Act. This might include confidentiality policies, rules regarding workplace communications and civility, cell phone and social media use, standards of conduct, and others.

This decision also applies retroactively. This means that employers may be subject to unfair labor practice charges on a retroactive basis. Employers should consider reviewing their policies now to ensure they comply going forward.

Crowell & Moring can help employers determine whether their policies are sufficiently narrowly tailored under this new standard.