NLRB reverts to tougher standard for determining the propriety of employer handbooks and workplace rules

In August 2023, the National Labor Relations Board (NLRB) issued a decision reverting to a tougher standard for assessing the propriety of employment policies and workplace rules.

The Board’s decision in Stericycle, Inc.[1] returns to a modified version of the standard established in Lutheran Heritage Village – Livonia[2] and overrules pro-employer rulings issued by the Trump-era Board in Boeing Co.[3] and LA Specialty Produce Co.[4]

The Board’s Stericycle decision represents a shift back to its previous, employee-friendly standard for interpreting workplace rules and away from its Trump-era trend of weighing employer justifications against the extent of the potential impact on NLRA rights.

The new standard provides that, if an employee could “reasonably” interpret a work rule to restrict an employee’s rights under the NLRA, the rule will be deemed presumptively unlawful even if a non-coercive interpretation is also reasonable.  The burden will then shift to the employer to prove that the rule advances a legitimate employer interest and that the employer is “unable to advance that interest with a more narrowly tailored rule.” 

Significantly, in interpreting the rule, the NLRB will now review employer policies from the perspective of an employee who contemplates engaging in protected activity but is cautious of violating workplace rules for fear of financial repercussions.  In other words, as the Board candidly acknowledges, the rule will not be interpreted from the perspective of a reasonable, disinterested observer, but rather an economically dependent employee who is inclined to give the rule a broad reading because she does not want to risk the loss of her job.

In light of this new standard, employers are encouraged to review their employee handbooks and other workplace rules and policies and potentially narrow or eliminate overly broad provisions in order to comply with the Board’s new ruling.

The Board’s decisions regarding the interpretation of workplace rules and policies

Section 8(a)(1) of the NLRA makes it an unfair labor practice for employers to interfere with, restrain, or coerce employees in the exercise of their right to engage in “concerted activities” under Section 7 of the Act, which includes employees’ right to organize and bargain collectively, to discuss their terms and conditions of employment, and to seek public support for their cause.  Significantly, the NLRA does not apply only to unionized workplaces – it broadly covers most non-supervisory employees of private employers.

The application of Section 8(a)(1) to workplace rules has been a contentious topic at the NLRB during the last several administrations.  In the Board’s 2004 decision in Lutheran Heritage, a Board majority held that workplace rules that do not explicitly target worker’s rights may still violate the NLRA if workers could “reasonably construe” them to ban organizing. In the wake of the Lutheran Heritage decision, the Board’s General Counsel issued numerous memoranda and brought several charges challenging employer handbook rules.

In its 2017 Boeing decision, the Board overturned its Lutheran Heritage decision and eased scrutiny on employer rules and policies, setting forth a test to determine whether a facially neutral policy or rule potentially interfered with an employee’s NLRA rights. The Boeing test weighed a challenged rule’s “potential impact on NLRA rights” against the “legitimate justifications associated with the rule.”

The Boeing decision and its progeny also set bright-line rules for employers. Under Boeing, the mere fact that a rule was overly broad was, by itself, insufficient to constitute a violation of the NLRA. Providing some certainty to employers, the Boeing board found that certain types of employer rules and policies, such as non-disparagement rules, rules prohibiting outside employment, and investigative confidentiality rules categorically did not interfere with an employee’s Section 7 rights.

In its 2019 Specialty Produce decision, the Board continued to lean into its employer-friendly stance on workplace policy and rule interpretation, declaring that rules must be interpreted not from the viewpoint of “traditional labor lawyers,” but from the “standpoint of reasonable employees.” Under Specialty Produce, the Board implied it would not scrutinize rules and policies with an eye to finding any conceivable interpretation of a workplace rule that could restrict Section 7 activity.

Back to the past: The Board’s Stericycle decision

Consistent with its reversion of many Trump-era rules (see our collection of relevant articles here), in Stericycle the current NLRB rejected its prior Boeing and Specialty Produce standards, stating that Boeing “fail[ed] to account for the economic dependency of employees on their employers,” inclining employees to “construe an ambiguous work rule to prohibit statutorily protected activities.” The Stericycle Board also rejected the Boeing Board’s categorial approach of finding lawful certain categories of rules.

Overruling all Board decisions which relied upon Boeing and Specialty Produce, the Stericycle Board built on and revised the Lutheran Heritage standard, announcing that the Board will evaluate on a case-by-case basis employer rules and policies based on how an employee who is “economically dependent on their employer” would understand the rules and policies. What an employer intended for its rule to accomplish will be “immaterial,” rather, “if an employee could reasonably interpret the rule to have a coercive meaning, the General Counsel will carry her burden” to establish a presumption that the rule or policy violates Section 7 “even if a contrary, noncoercive interpretation of the rule is also reasonable.”

Employers may rebut this new 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 rule remains overbroad when “it could be narrowed to lessen the infringement of employees’ statutory rights while still advancing the employer’s interest…” and any ambiguous rules will be construed against the employer.

Where do employers go from here?

The NLRB’s Biden-appointed general counsel has established a track record of scrutinizing workplace rules and policies, aiming to unearth any interpretation which could interfere with an employee’s NLRA rights. As we have seen in the McLaren Macomb decision,[5] and the NLRB’s general counsel’s memorandum on non-competition agreements,[6] the NLRB’s recent policy shift is impacting unionized and non-union employers alike. We expect to see continued litigation scrutinizing handbook provisions, rules, and other policies in light of the Stericycle decision.  We note that the Board’s decision remains subject to federal appellate review, whether in this case or another raising the same issues. 

As to practical next steps, a review of the Lutheran Heritage decision and cases that followed it, such as T Mobile USA. Inc. v. NLRB[7] and Pauma v. NLRB[8] provide some guidance as to the types of work rules that are likely to be scrutinized.  These rules include social media, non-disparagement, confidentiality of investigations and complaints, the use of recording devices in the workplace, and acceptable use of company communication resources.  Employers may want to place particular emphasis on review and potential modifications of these rules and policies.

The Board did not address the issue of whether a “safe harbor” provision could disclaim any potential infringement on employee rights, but we anticipate that future Board cases and/or General Counsel memoranda will provide additional color on workplace rules and policies that pass muster under the Board’s newly articulated standard.

Our team of dedicated labor and employment professionals has extensive experience weighing the business, legal and practical implications associated with these issues and assisting clients to choose the approach that is best for their particular business.  If you have any questions about the effect of this decision on your current practices, please contact the authors or your DLA Piper relationship partner.