ALERT: NLRB Develops New Standard for Assessing Legality of Employer Workplace Rules

Employers Experience Whiplash After NLRB Changes Its Position Yet Again on Workplace Rules and Employee Handbook Provisions

In its latest blow to employer autonomy and return to previously overruled precedent, on August 2, 2023, the National Labor Relations Board (“NLRB” or the “Board”) issued a 3-1 decision in Stericycle Inc., 372 NLRB No. 113 (2023), addressing when and how employer work rules and employee handbook policies may violate employees’ rights to engage in protected concerted activity under Section 7 of the National Labor Relations Act (“NLRA”). With this ruling, the current Board, with a majority of members nominated by President Biden, directly rejected another one of the hallmark decisions of the Board under the Trump Administration – The Boeing Company, 365 NLRB No. 154 (2017).  As a result, all employers – whether or not unionized – should promptly review their own policies and consider whether they would be wise to revise them in light of the new standards.

A Little History – The Previous Boeing Co. and Lutheran Heritage Standards

In the now-overruled 2017 Boeing Co. decision, the Board established a three-part test for determining whether facially neutral workplace rules and employee handbook provisions unlawfully interfered with employee exercise of rights protected by the NLRA. In crafting that test, the Board evaluated only: (a) the nature and extent of the potential impact on NLRA rights, and (b) legitimate justifications associated with the work rule.  The Board also delineated how, on a going-forward basis, work rules would be evaluated in one of three buckets:  (1) rules that the Board designates as lawful to maintain, (2) rules that warrant individualized scrutiny in each case as to whether the rule would prohibit or interfere with NLRA rights, and (3) rules that the Board designated as always unlawful to maintain because they would prohibit or limit NLRA-protected conduct. At the time, this test was deemed a practical approach that would allow both counsel and their employer clients to reasonably assess work rules to identify potential violations prior to any claims of unlawful activity and remedy them.

Notably, Boeing Co. itself had overruled the Board’s 2004 decision in Lutheran Heritage Village-Livonia, 343 NLRB 646, 647 (2004), which held that employers violated the NLRA merely by maintaining workplace rules that could be “reasonably construed” by an employee to prohibit the exercise of NLRA rights – even if the rules did not explicitly prohibit employees from engaging in protected activities. This had long been viewed as a challenging standard for employers, since it was often impossible to assess what a reasonable employee would construe as creating a chilling effect.

The New Stericycle, Inc. Standard

In Stericycle, Inc., the Biden Board decided that the Boeing Co. balancing approach wrongfully “permit[ed] employers to adopt overbroad work rules that chill employees’ exercise of their rights under Section 7 of the [NLRA].” The new Stericycle, Inc. standard attempts to correct this by shifting the burden onto employers to demonstrate that a particular work rule is legitimate.

Moving forward, employer work rules and handbook provisions will be evaluated in two steps:

1. First, the Board will assess whether the challenged work rule has a reasonable tendency to chill employees from exercising their rights under Section 7 of the NLRA.

• If it does, then the workplace rule is presumptively unlawful.
• This is so even if it could be reasonably interpreted not to restrict Section 7 rights, and even if the employer did not intend to restrict Section 7 rights.
• The Board will analyze this from the perspective of a reasonable layperson – not a lawyer – who is “economically dependent” on the employer for a livelihood, who is inclined to interpret an ambiguous rule as restricting Section 7 activity.

2. Second, an employer may rebut this presumption of unlawfulness by demonstrating 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.”

In rejecting the notion that this new framework sacrifices clarity and predictability for employers, the Board made clear that its return to a case-by-case analysis still requires an examination of the specific wording of the rule, the specific industry and workplace context, the specific employer interests advanced, and the specific statutory rights potentially infringed, with a goal that similarly worded rules would be evaluated consistently with previously considered ones arising in a similar context or with similar employer interests.

As a cherry on top of its shift in policy, the Board also announced that the Stericycle, Inc. decision applies retroactively to currently existing policies. This means that the new standard does not just apply to newly issued policies following Stericycle, Inc. but also to policies in place while Boeing Co. was the governing law.  

While the employee work rules at issue in the Stericycle, Inc. case addressed personal conduct, conflicts of interest, and confidentiality of harassment complaints, the decision is not limited in scope to such policies. To the contrary, Stericycle, Inc. now sets the standard for evaluating any employee work rule or handbook provision that an economically dependent employee could reasonably see as chilling rights to engage in protected concerted activity under the NLRA.

For Further Information

For more information on appropriate steps to take with regard to your business’s workplace rules or employee handbook provisions, or to address issues arising for you on this or any related topic, please contact Jennifer Platzkere Snyder, Claire Blewitt Ghormoz, or any member of Dilworth’s labor and employment team.