NLRB Issues Decision Restoring Employee-Friendly Standard for Determining Whether Work Rules Violate Workers’ Rights

On Wednesday, August 2, 2023, the National Labor Relations Board (NLRB) issued a split ruling that addresses how it will determine whether employers’ handbook and workplace rules are lawful. In Stericycle, Inc. and Teamsters Local 628, 372 NLRB No. 113 (2023), the Board overturned a more employer-friendly, Trump-era standard, restoring and modifying the more employee-friendly standard that was previously in place.

My Workplace Doesn't Have a Union – Does this Apply to Me?

If your company has employees, this ruling is relevant to you – whether your workplace has a union or not.

The National Labor Relations Act (NLRA), which was passed in 1935, is the law that guarantees private sector employees the right to form unions and engage in collective bargaining. It also formed the NLRB, which enforces the Act, for example, by prosecuting violations of labor law and overseeing union elections. Even employers who don’t have unions or whose employees aren't currently organizing or engaged in unionizing campaigns are still subject to the Act. That is because all employees – whether they are in a union or not – are granted “Section 7 rights,” which include not only the right to form unions, but also the right “to engage in other concerted activities for the purpose of . . . other mutual aid or protection.” In other words, all employees are guaranteed the right to work collectively to better the terms and conditions of their employment.

The New Standard for Work Rules

Wednesday's decision restores – and slightly modifies – a 2004 standard set forth in Lutheran Heritage Village-Livonia, 343 NLRB 646 (2004), and overturns a Trump-era test for determining whether employers’ work rules and policies are unlawful, even when the work rule at issue does not expressly or explicitly restrict employees’ protected concerted activity under Section 7.

Specifically, as under the 2004 Lutheran Heritage decision, the new standard requires the prosecuting entity to prove that a challenged rule has a “reasonable tendency to chill employees from exercising their Section 7 rights.” Wednesday's ruling clarifies that the Board will interpret the work rule in question from the perspective of an employee who is subject to the rule and “economically dependent on the employer, and who also contemplates engaging in protected concerted activity.” Whether or not the employer actually intends the rule to restrict workers from engaging in concerted protected activity is immaterial. A policy will be found unlawful if an employee reasonably interprets it as being coercive, even if there is also a possible interpretation that is non-coercive. If that standard is met, then the rule will be deemed “presumptively unlawful,” and the burden shifts to the employer, who has the opportunity to rebut that presumption by proving that the rule advances a “legitimate and substantial business interest” that cannot be accomplished with a more narrowly tailored rule. If the employer demonstrates this, then the work rule will be found lawful.

The previous employer-friendly, Trump-era standard, announced in Boeing Co., 365 NLRB No. 154 (2017), held that, when deciding the lawfulness of maintaining a “facially neutral” work rule, 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.” Those two factors would be balanced against each other.

The Boeing majority had also created a categorical classification system for evaluating rules under its standard, made up of three categories:

• “Category 1” rules, which were always lawful to maintain. See, e.g., Newmark Grubb Knight Frank, 369 NLRB No. 121, slip op. at 2–3 (rules prohibiting outside employment, providing employee references, and use of employer property for personal benefit); Medic Ambulance Service, 370 NLRB No. 65, slip op. at 2–4 & fns. 7, 9–11 (2021) (confidentiality rules for proprietary information); Verizon Wireless, 369 NLRB No. 108, slip op. at 4–5 (2020) (rules allowing the search of employee property, including vehicles, on employer premises);
• “Category 2” rules, which were sometimes lawful to maintain; and
• “Category 3” rules, which were always unlawful to maintain. See, e.g., Tesla, Inc., 370 NLRB No. 101, slip op. at 5 (2021) (rules prohibiting communications with the media); First American Enterprises d/b/a Heritage Lakeside, 369 NLRB No. 54, slip op. at 1–2 & fn. 9 (rules prohibiting discussion of wages and benefits); Union Tank Car Co., 369 NLRB No. 120, slip op. at 3 (2020) (non-disparagement rules extending to conversations among employees).

The intent of Boeing’s categorical approach was to “provide far greater clarity and certainty” for employers. Now these categories are gone, and the NLRB will examine each workplace rule on a case-by-case basis.

The Work Rules at Issue

Notably, Wednesday’s decision focused on the standard by which the NLRB will determine whether work rules are lawful; it spent no time analyzing the actual rules at issue in the case, which it simply referred to as, “overbroad work rules governing personal conduct, conflicts of interest, and confidentiality of harassment complaints.”

However, employers would do well to focus on the actual rules at issue, since notably they were found to be unlawful even under the employer-friendly, Trump-era standard. The NLRB explained that since it was announcing a new standard, it would not review the Administrative Law Judge’s (ALJ’s) application of the Trump-era Boeing standard as to the work rules at issue in the case, but instead was remanding the case to the ALJ to allow the parties “an opportunity to present arguments and introduce any relevant evidence under the new standard announced today.” Presumably, since the work rules were deemed unlawful under the more employer-friendly Boeing standard, they will also be deemed unlawful under the NLRB’s newly announced employee-friendly standard.

First, the rule regarding personal conduct provided, in relevant part that:

This rule was held by the ALJ to be unlawful because a rule prohibiting employees from damaging their employers’ reputations might restrict employees from working collectively to better the terms and conditions of their employment. After all, one can imagine that an employee who complains about a dangerous condition in the workplace or an unfair workplace practice might fear being accused of violating this rule and being disciplined for it.

The “conflicts of interest” rule read, in relevant part, as follows:

Again, this rule was held to be unlawful by the ALJ, even under the Trump-era standard, since an employer cannot prohibit employees from engaging in conduct that could conflict with its interests where those interests could include union interests or efforts to improve workers’ terms and conditions of employment. As the ALJ explained, the rule could presumably be saved if it was clarified to let employees know that it should not be interpreted to prohibit protected activity.

The “confidentiality of harassment complaints” rule provided, in relevant part:

The unlawfulness of this rule might seem counterintuitive in the sexual harassment context. After all, many employees fear reporting sexual harassment because they do not want their situation to be widely known. It hardly seems controversial that those charged with investigating a sexual harassment complaint should maintain confidentiality of the situation to the extent possible. However, this rule was deemed unlawful by the ALJ because it was not clear from the handbook that it was limited to sexual harassment complaints and resolutions. Indeed, it was in a separate section of the handbook from the anti-harassment provisions. Additionally, because it prohibited “all parties involved” from sharing details about the complaint and its resolution, it could reasonably be interpreted from prohibiting the individual who allegedly experienced sexual harassment from freely discussing her own complaints and the company’s response. It could also be interpreted as pertaining to other types of complaints beyond sexual harassment complaints, to include complaints related to terms and conditions of employment.

Review of Employee Handbooks and Policies

If the rules above didn’t jump out at you as unlawful, or if it has been a while since legal counsel put eyes on your handbooks and employment policies, a review of those materials may be a wise decision. We expect that the Board will now scrutinize handbooks and policies in any charge involving employee discipline filed with the NLRB. Calfee's Labor and Employment lawyers are available to assist in reviewing handbooks and employment policies to comply with the Board’s new decision and take into account employees’ Section 7 rights.