NLRB Adopts Volatile New Standard for Evaluating Work Rules

On August 2, 2023, the National Labor Relations Board (the “NLRB” or “Board”) issued its decision in Stericycle Inc., 372 NLRB No. 113 (2023) (“Stericycle”) overruling the standards established in The Boeing Company, 365 NLRB No. 154 (2017) (“Boeing”) and LA Specialty Produce Co., 368 NLRB No. 93 (2019) (“LA Specialty Produce”) for determining whether facially neutral work rules violate Section 8(a)(1) of the National Labor Relations Act (“NLRA”). The standard the Board sets forth in Stericycle applies to union and non-union workplaces and goes far further than simply overruling cases decided during the Trump Administration. Under the new standard, a work rule is presumptively unlawful if it has a reasonable tendency to chill employees from exercising their rights when viewed from the perspective of the reasonable employee, even if a contrary interpretation of the rule is also reasonable. Once established, the employer must prove that 1) the rule advances a legitimate and substantial business interest, and 2) that the employer is unable to advance that interest with a more narrowly tailored rule.

Boeing, LA Specialty Produce, and Facially Neutral Work Rules

During the Obama Administration, the Board increasingly used the standard established in Lutheran Heritage Village-Livonia, 343 NLRB No. 646 (2004) to invalidate neutral work rules to the point where nearly any language contained in their employment agreements, handbooks, and other policies could put an employer at risk of being found in violation of the NLRA. Among many others, this included:

• Non-disclosure and non-disparagement clauses in various policies and agreements distributed to employees
• Social media
• Confidentiality – generally
• Confidentiality of investigations
• Handbook disclosure provisions
• At-will employment policies and at-will acknowledgements
• Speaking to the media
• No Solicitation / No distribution for employees
• Access rights for non-employees
• Insignia and dress code
• Recordings and cameras
• Equal Employment Opportunity
• Harassment
• On-duty conduct
• Chain of command
• Restrictions on employee use of email and other communications systems
• Fraternization
• Bulletin boards and electronic message boards
• Surveillance and security protocols
• Company logos, copyrights, and trademarks
• Conflict of interest
• Employee complaint procedures
• Probationary periods
• Performance review policies and procedures
• Disciplinary policies
• Promotion and transfer policies
• Speaking with government agencies
• Non-cooperation provisions

In Boeing, the Trump Board revised the standard for evaluating neutral work rules to a balancing test that weighed the rule’s impact on an employee’s ability to exercise their rights under the NLRA and an employer’s legitimate business interests. In LA Specialty Produce, the Board clarified that work rules would be divided into three separate categories — 1) rules that the Board designates as lawful to maintain; 2) rules that warrant individualized scrutiny; and 3) rules that the Board designates as unlawful to maintain.

After many years of increasing volatility, the standards established in Boeing and LA Specialty Produce gave employers a level of stability and predictability in their ability to maintain discipline and productivity in the workplace.

A Drawn-Out Yet Predictable Return

As we previously reported, the NLRB announced in late December 2021 and early January 2022 that it sought public comment on whether to reconsider two significant standards: the independent contractor standard established in SuperShuttle DFW, Inc., 367 NLRB No. 75 (2019) and the standard for assessing the lawfulness of facially neutral work rules established in Boeing/LA Specialty Produce. We addressed the independent contractor standard in another recent blog post.

With respect to facially neutral work rules, the Board sought input on the following questions:

1. Should the Board continue to adhere to the standard adopted in Boeing and revised in LA Specialty Produce?
2. In what respects, if any, should the Board modify existing law addressing the maintenance of employer work rules to better ensure that:
   • the Board interprets work rules in a way that accounts for the economic dependence of employees on their employers and the related potential for a work rule to chill the exercise of Section 7 rights by employees;
   • the Board properly allocates the burden of proof in cases challenging an employer’s maintenance of a work rule under Section 8(a)(1); and
   • the Board appropriately balances employees’ rights under Section 7 and employers’ legitimate business interests?
3. Should the Board continue to hold that certain categories of work rules —such as investigative-confidentiality rules as addressed in Apogee Retail LLC d/b/a Unique Thrift Store, 368 NLRB No. 144, (2019), non-disparagement rules as addressed in Motor City Pawn Brokers, 369 NLRB No. 132 (2020), and rules prohibiting outside employment as addressed in Nicholson Terminal & Dock Co., 369 NLRB No. 147 (2020), and G&E Real Estate Management Services d/b/a Newmark Grubb Knight Frank, 369 NLRB No. 121 (2020)— are always lawful to maintain?

When the Board announced this invitation, it already seemed likely that the standards from Boeing and LA Specialty Produce were likely to be overruled. This summer, nearly a year and a half later, the Board finally answered those questions and went even further.

In Stericycle, the Board held that it would not continue to adhere to the standard adopted in Boeing and revised in LA Specialty Produce and, accordingly, would no longer hold that certain categories of work rules are always lawful to maintain. Instead, the NLRB announced a new standard with a much lower burden on General Counsel and a much higher burden on employers.

The New Standard for Evaluating Work Rules

Under the new standard, first, the General Counsel must merely establish that rule has a reasonable tendency to chill employees from exercising their rights. This is evaluated from the perspective of the reasonable employee who is “inclined to interpret an ambiguous rule to prohibit protected activity she would otherwise engage in.” The Board further states that if an employee could reasonably interpret a rule to restrict or prohibit protected activity, the General Counsel has met this burden. That is true even if a contrary interpretation is also reasonable. An employer’s intent in maintaining a rule is immaterial at this stage. If the General Counsel meets this burden, the challenged rule is presumptively unlawful.

The new standard sets a high bar for employers attempting to rebut this presumption. An employer can only rebut this presumption by proving that 1) the rule advances a legitimate and substantial business interest, and 2) that the employer is unable to advance that interest with a more narrowly tailored rule. In a press release announcing the decision, NLRB Chairman Lauren McFerran stated “Under the new standard, the Board will carefully consider both the potential impact of work rules on employees and the interests that employers articulate in support of their rules. By requiring employers to narrowly tailor their rules to serve those interests, the Board will better support the policies of the National Labor Relations Act.”

Key Takeaways

Due to the heavily employee-friendly standard established in Stericycle, employers should expect that work rules with any ambiguity will be subject to scrutiny. Given the zeal with which NLRB General Counsel Jennifer Abruzzo has sought to challenge relatively conventional employment practices, many workplace policies are no longer safe from being found to violate the NLRA. This decision likely will result in testing of employer policies through the filing of charges and more Board decisions applying the test. While pure handbook violations under the NLRA are seemingly minor, they can serve to block representation elections, overturn elections where the employer has prevailed, and otherwise consume employer resources without a detectable impact on employees’ Section 7 activities. Employers should reevaluate their work rules, including handbooks to consider whether their rules could be interpreted to restrict Section 7 activities. Further, while adding NLRA disclaimers for Section 7 activities theoretically could help in a close case, the Board has not yet considered the sufficiency of disclaimers under this new standard. Thus, precise drafting of work rules is crucial to avoid such rules being found unlawful. 

Story originally seen here