United States: New NLRB Majority Calls Off The War On Employee Handbooks

On December 14, 2017, the National Labor Relations Board issued an important decision in The Boeing Co., 365 NLRB No. 154 (2017), where the Board's new three-member majority established a new standard for evaluating the validity of employer rules, policies, and handbook provisions under the National Labor Relations Act ("the Act").

Under the new standard, the Board no longer will focus solely on whether employees would "reasonably construe" a rule to restrict rights under the Act to determine if the rule is unlawful. Rather, when reviewing a facially neutral rule that, when reasonably interpreted would potentially interfere with the exercise of employee rights, the Board will evaluate: (i) the nature and extent of the potential impact on those rights; and (ii) legitimate justifications associated with the rule. When legitimate justifications outweigh a rule's potential impact on protected rights, it will be found lawful. Additionally, to provide clarity and predictability in this area, the Board delineated three categories into which rules will be placed in future cases, based on whether its balancing test demonstrates they are: (i) lawful; (ii) unlawful; or (iii) subject to individualized scrutiny on a case-by-case basis.

In the case before it, the Board concluded that the employer's workplace no-camera rule was lawful, reversing prior cases in which similar rules were invalidated. It further found that in the future, no-camera rules will be treated categorically as lawful. The Board also reversed prior decisions by categorizing rules promoting "harmonious interactions and relationships," and requiring civility in the workplace, as lawful. Finally, the Board distinguished cases involving the maintenance of rules, such as the one before it, from cases in which a rule is applied in an unlawful manner, concluding that it will continue to find violations when actual interference occurs.

Background Concerning the Disputed Rule in The Boeing Co.

The employer maintained a rule that restricted the use of camera-enabled devices such as cell phones on its property without a valid business need. The rule did not explicitly restrict any activity protected by the Act; it was not adopted in response to protected activities; and it was not applied to restrict such activities. The employer presented evidence that the rule was justified by the need to maintain confidentiality of the work performed at its facilities, some of which is classified, and by the need to secure the facilities and work performed there against espionage by competitors, foreign governments, and international terrorists. In short, the no-camera rule remains an important part of the way the employer maintains security at its facilities, protects its business, and promotes national security.

In a decision issued in May 2014, the Administrative Law Judge (ALJ) found this rule unlawful under Lutheran Heritage Village-Livonia, 343 NLRB 646, 647 (2004). Under that standard, a workplace rule that did not explicitly restrict employee rights would nonetheless be found invalid if employees would reasonably construe it that way. The ALJ found that the employer's no-camera rule could discourage protected activities that management would not consider business needs, such as photographing a solidarity march during a lunch break or recording an unsafe condition at work. He gave no weight to the employer's justifications for having the rule.

Following issuance of the ALJ's decision, the Board found in other cases that the Act protects employees' right to make recordings in the workplace in furtherance of other protected, concerted activities. For example, the Board held that prohibiting photos and audio recordings in the workplace is unlawful because such a rule could restrict recordings of picketing, discussions about workplace conditions, or other protected activities.1 The ALJ's determination regarding Boeing's policy in essence anticipated these Board developments.

The Boeing Co. Reverses the ALJ, Overrules Lutheran Heritage, and Establishes a New Standard for Workplace Rules

The decision in The Boeing Co. broadly criticized the rationale and wisdom of Lutheran Heritage. The Lutheran Heritage standard was challenged based primarily on its singular focus on rights protected by the Act. As the majority pointed out, failing to consider the legitimate justifications associated with employer rules prevents the Board from balancing their impact on employee rights and conflicts with U.S. Supreme Court rulings and the Board's own precedents.

The majority's critique also highlighted an important contradiction in Lutheran Heritage. On the one hand, the Act contains a broad, simply stated protection of employees' right to engage in "concerted activities" for their "mutual aid and protection." Yet, Lutheran Heritage takes the contradictory position that employer policies cannot be either broad or simply stated because of the risk they might imply a restriction on protected activities. This contradiction creates an unattainable standard under which all hypothetical permutations of protected activities concerning a given subject must be correctly anticipated, identified, and assiduously carved out in order to prevent ambiguity and produce a lawful rule. The Boeing Co. describes in detail how Lutheran Heritage created inconsistent, confusing results that discouraged the maintenance of rules, with the foreseeable result that both employers and employees were deprived of rules that benefit the workplace.

Under the Board's new standard, if a facially neutral rule may, when reasonably interpreted, potentially interfere with rights under the Act, the Board will evaluate both: (i) the nature and extent of the potential impact on employee rights; and (ii) legitimate justifications associated with the rule. In balancing these considerations, the Board stated it intends to develop certain, clear rules upon which employees and employers can rely. Toward that end, the decision delineates three categories of rules:

Category 1 includes rules that the Board designates as lawful because they do not restrict rights under the Act, or because the justifications for the rule outweigh their tendency to restrict such rights;

Category 2 includes rules that warrant individualized consideration of whether they prohibit or interfere with employee rights, and if so, whether the impact is outweighed by other, legitimate considerations; and

Category 3 includes rules that the Board designates as unlawful because they would restrict rights protected by the Act in a way that outweighs any justifications associated with them.

Turning to the no-camera rule found unlawful by the ALJ, the Board concluded that it was lawful. The majority acknowledged that the rule could in some circumstances potentially affect the exercise of rights under the Act, but also characterized the impact as "comparatively slight." Most of the images covered by the rule simply do not implicate employee rights, and no one claimed that the rule actually interfered with any type of protected activity. Meanwhile, the potential adverse impact on employee rights was outweighed by substantial justifications. The Board majority found these justifications common to no-camera rules generally and therefore placed such rules in Category 1, to be treated as lawful in future cases.

The Board also populated its new categories with additional rules, some of which were at issue in precedents relied upon by the ALJ. In particular, the Board said that rules promoting "harmonious interactions and relationships" in the workplace, which previously had been invalidated by the Board, will be treated as lawful Category 1 rules. Likewise, rules requiring employees to observe basic standards of civility in the workplace were ruled appropriate for Category 1. In contrast, the Board provided as an illustration of unlawful Category 3 rules those that prohibit employees from communicating with one another about wages and benefits.

What the Board's Decision Means for Employers

The Boeing Co. radically changes the way the Board evaluates employer rules, including rules pertaining to conduct in and out of the workplace, such as those involving social media. By balancing considerations favoring maintenance of rules, the new standard will expand the scope and type of rules the Board will find lawful, and improve employers' ability to tailor rules to suit their and employees' needs.

Because balancing tests can yield unpredictable results, the categories described in the decision also are important and promise to significantly increase certainty in the Board's rules cases. The identification of rules as Category 1 and Category 3 rules will simplify and assist employers in determining what rules are in-bounds or out-of-bounds, without the constant risk of enforcement litigation. The use of these categories also promises to establish more durable precedents that will support stable, consistent employer rules.

Of course, how the Board defines the types of rules that will be placed in a given category will go a long way towards determining how useful the categories will be. For instance, will the Board treat a civility rule that also requires "respectful" conduct toward coworkers as a Category 1 rule, or is that requirement essentially different and subject to separate categorization? The more narrowly the Board defines the types of rules within a category, the more litigation will be necessary to populate them, and the less predictable The Boeing Co.'s new standard may become.

For now, employers that have refrained from adopting no-camera or recording rules, or have shied away from civility codes in their workplaces because of the Board's prior adverse rulings, have the green light to proceed. Regarding other rules, employers should continue to take into account potential restraints on rights under the Act that might be inferred from the way they are worded. Rules that cannot be construed to interfere with employee rights will always be found lawful. Following The Boeing Co. decision, employers may also consider whether the nature and weight of the interests supporting a rule warrant adopting it despite the potential to overlap with rights under the Act. As always, employers should speak with knowledgeable legal counsel to consider the enforcement risks associated with particular rules.

Footnotes

1 See Caesar's Entertainment, 362 NLRB No. 190 (2015) and Whole Foods Market, 363 NLRB No. 87 (2015).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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