On August 2, 2023, the National Labor Relations Board (NLRB) issued an important decision in Stericycle, Inc (Stericycle), overruling a 2017 precedent (Boeing Co.) that had granted employers greater latitude in crafting workplace policies. The decision returned to a slightly modified version of the standard announced in 2004 (the Lutheran Heritage decision) to determine whether an employer’s work rule that does not expressly restrict employees’ protected concerted activity (i.e., policy regulating personal conduct, conflict of interest, confidentiality of harassment complaints, camera and video use, etc.) under Section 7 of the National Labor Relations Act (Act) is nonetheless facially unlawful under Section 8(a)(1) of the Act. The new standard established by the Stericycle decision is effective immediately, applies retroactively, and applies to both unionized and non-unionized employers. The cracking down of employer-friendly standard is a challenge for employers and here is what they should know.
Section 7 & 8(a)(1) of the National Labor Relations Act:
Section 7 of the Act guarantees employees (at both unionized and non-unionized workplaces) “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” as well as the right “to refrain from any or all such activities.”
Section 8(a)(1) of the Act 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.
The NLRB has long recognized that an employer’s mere maintenance of a work rule may unlawfully interfere with, restrain, or coerce employees’ exercise of their Section 7 rights. Republic Aviation Corp. (1943).
The Lutheran Heritage (2004) Standard:
In the NLRB’s Lutheran Heritage Village-Livonia (2004) decision, the Board adopted a standard by first asking “whether the rule explicitly restricts activities protected by Section 7.” If it does not, a violation depends on showing one of the following: “(1) employees would reasonably construe the language to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of Section 7 rights.” Accordingly, as long as an employee could “reasonably construe” a challenged workplace rule as prohibiting the exercise of Section 7 rights, the violation of Section 8(a)(1) occurred. The NLRB subsequently applied this standard to find many otherwise neutral rules unlawful, such as those prohibiting the use of cameras in production areas, disruptive behavior in the workplace, and speaking to the public or the medial.
The Boeing (2017) and LA Specialty (2019) Standard:
The NLRB changed its position in 2017 when issuing the decision in Boeing Co. (2017), a Trump-era regarding whether an employer policy restricting the use of camera-enabled devices such as cell phones on company property violated the Section 8(a)(1) of the Act. Under the Boeing standard, the NLRB 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. According to the majority, the Lutheran Heritage standard “did not permit the Board to consider an employer’s legitimate business reasons for maintaining a rule; to distinguish between more and less important Section 7 interests; to differentiate among industries, work settings, or specific circumstances reflected in a given rule; or to produce consistent rulings in work-rules cases.”
The Boeing majority also created a categorical approach to work rules, under which certain types of work rules are always lawful, regardless of how they were drafted and what business interest the employer claimed in defense of the rule. (In “Category 1”—rules that were always lawful to maintain—it would put rules that, as a type, did not interfere with Section 7 rights and rules where the adverse impacts on Section 7 rights were outweighed by justifications associated with such rules. In “Category 2”—rules that were sometimes lawful to maintain—it would put rules that “warrant scrutiny in each case.” And in “Category 3”—rules that were always unlawful to maintain—it would put rules that, given their impact on protected activity, could never be justified by an employer.). In the subsequent decision in LA Specialty Produce Co. (2019), the Board clarified how the Boeing rules should be interpreted. One ostensible clarification is that the NLRB General Counsel bears the initial burden to prove that a facially neutral rule would be interpreted by a reasonable employee to potentially interfere with the exercise of Section 7 rights. In an effort to elucidate the categorical approach, the majority also explained that a rule should be placed in Category 1 when the “general” employer interests in maintaining such a rule outweigh the potential impact on the exercise of Section 7 rights.
August 2023 – The NLRB Abandons the Boeing Standard and Returns to Lutheran Heritage Standard:
Stericycle is a case in which the union alleged the employer maintained overly broad work rules for employees, including those that required workers to keep harassment complaints confidential and those that prevented them from taking actions that could harm the employer’s reputation. In its decision, the NLRB rejected the Boeing standard in favor of a slightly modified Lutheran Heritage standard. The Board underscored that the primary problem with the Boeing standard is that “it permits employers to adopt overbroad work rules that chills employees’ exercise of their rights under Section 7 of the Act . . . .” The Board further stated the Boeing standard “fails to account for the economic dependency of employees on their employers” and “gives too much weight to employer interests.”
Under the new standard, the General Counsel must prove that a challenged rule has a reasonable tendency to chill employees from exercising their Section 7 rights. Note that the Board will interpret the rule from the perspective of an employee who is subject to the rule and economically dependent on the employer, and the employer’s intent in maintaining a rule is immaterial.
Once the General Counsel carries the burden, the rule is presumptively unlawful. However, “the employer may rebut the 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. If the employer proves its defense, then the work rule will be found lawful to maintain.” This framework rejected the Boeing’s categorical approach, and Board will scrutinize work rules on a case-by-case basis.
StraightforWARD Legal Advice:
The employee-centered standard will be a challenge for employers. Employers can now anticipate upcoming unfair labor practice charges based on the policies in their employee handbook. The Stericycle decision is a reminder for unionized and non-unionized employers to work with employment and labor counsels to review and update their employee handbooks, and carefully craft their policies. Employers should consider incorporating more narrowly tailored rules that advance the same interests in the employee handbooks, if feasible.
Ward Law’s employment and labor lawyers are always available to assist employers in reviewing and revising their handbook policies to comply with the new standard. If you have questions, please contact Christopher Curci at (215) 647-6603 or firstname.lastname@example.org.