On August 2, 2023, the National Labor Relations Board (NLRB, or the "Board") created a new standard for assessing the lawfulness of workplace rules under the National Labor Relations Act. In Stericycle, Inc., 372 NLRB No. 113 (Aug. 2, 2023), the Board overturned the standards that it established over five years ago in Boeing Co., 365 NLRB No. 154 (2017), when the Board had a Republican majority (as opposed to the 3-1 Democrat majority that decided this case). Applying its decision retroactively, now, if "an employee could reasonably interpret a rule to restrict or prohibit" Section 7 rights, the rule will be presumptively unlawful, and the employer will have a high burden to rebut that presumption.
Employers, regardless of whether they are union or nonunion (the Act covers virtually all private sector employees, not just those in a union), need to assess their workplace policies and handbooks in light of this new decision.
Short-Lived History of Boeing
For decades, as the Board has oscillated politically, there has been an ongoing battle over how it should assess the lawfulness of employer work rules. In 2004, the Board took a significant step toward trying to clarify the standard for analyzing a facially neutral work rule that could affect an employee's right to engage in Section 7 activity (i.e., the right to engage in concerted activity for mutual aid or protection). In Lutheran Heritage Village-Livonia, 343 N.L.R.B. 646 (2004), the Board found that?even if the rule itself did not expressly prohibit or limit protected, concerted activities?it could nonetheless be unlawful if:
- Employees would reasonably construe the language of the rule to prohibit Section 7 activity;
- The rule was promulgated in response to union activity; or
- The rule has been applied to restrict the exercise of Section 7 rights.
With respect to the first category, because it involved subjectively analyzing the perspective of an employee, application of the standard was inconsistent. As a result, it was difficult for employers to predict when a workplace rule could potentially run afoul of the Board's test. For example, common workplace rules, such as those relating to workplace civility or confidentiality, could affect protected speech. Was the mere possibility of such an effect enough to make the rule unlawful?
In response to the growing body of inconsistent law, in 2017, the Board issued Boeing. In addition to overturning Lutheran Heritage, the Boeing decision provided additional clarity about how the Board should assess a work rule or policy that does not expressly inhibit workers' rights. Specifically, the Board explained that it would evaluate two factors: (1) the nature and extent of the potential impact on Section 7 rights and (2) the legitimate justifications associated with the rule. It further delineated three categories of workplace rules: (1) Category 1 rules were presumptively lawful; (2) Category 2 rules warranted individual scrutiny; and (3) Category 3 rules were per se unlawful. These categories provided at least some guidance to employers as to the types of policies they could lawfully maintain (and those they could not).
NLRB Invents and Retroactively Applies New Standard
Unfortunately, but as anticipated following a changing of the guard, the Board decided to completely reverse Boeing and reject all of its progeny. In Stericycle, the Board has not only restored the more subjective analysis of Lutheran Heritage, but has layered into the test greater sensitivity for the possibility that a work rule could influence an employee's exercise of Section 7 rights. Even though in the underlying decision, the administrative law judge found that the rules at issue were unlawfully overbroad under the Boeing standard, the Board seized the opportunity to reverse Boeing and to create a new, more critical test. Overall, the Board's holding will significantly increase the level of scrutiny for work rules and policies, and make it harder to employers to maintain general rules that aim to provide safe and harmonious workplaces and to protect company information.
Moving forward, when analyzing an allegation that a work rule is unlawful under the Act, the Board will assess whether that work rule "has a reasonable tendency to chill employees from exercising their Section 7 rights." In doing so, the Board will view the rule from the perspective of a "reasonable employee who is economically dependent and thus inclined to interpret an ambiguous rule to prohibit protected activity." [Emphasis added.] In other words, the Board will automatically assume that if the rule is ambiguous as to whether it might restrict Section 7 activity, an employee will believe that it does restrict them from exercising their Section 7 rights. This assumption will apply regardless of the employer's intent in creating the rule.
With this change, the Board is not only restoring the subjectivity of the Lutheran Heritage standard that previously led to inconsistency and confusion, but has broadened that subjective standard beyond what a "reasonable employee" may think. Now, the standard is what a reasonable employee who actively wants to engage in Section 7 activity and feels economically dependent on the employer (i.e., someone who may feel vulnerable, even if the employer has done nothing wrong) may think.
If the Board determines there is such a reasonable tendency, the rule will be presumptively unlawful, and the burden will shift to the employer to show 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." This means that, even if a rule is facially neutral with no ill intent, an employer must be able to prove that it narrowly tailored the rule to prevent potential restriction of employee rights. Essentially, the Board is now requiring employers to try to predict how an employee may interpret its work rules and to tailor its rules to prevent interpretations that could conflict with the Act.
Having eliminated the Boeing categories (which provided at least some predictability for employers), the Board will now assess work rules on a case-by-case basis. It will analyze, among other factors, the specific wording of the rule, the specific industry and workplace context in which it is maintained, the specific employer interests it may advance and the specific statutory rights it may infringe. Importantly, this standard will apply retroactively, including to all pending cases.
What This Means for Employers
Moving forward, employers cannot rely on prior Board decisions finding that certain types of policies were generally lawful (e.g., Boeing, finding prohibitions on recording devices presumptively lawful). If someone files an unfair labor practice charge alleging that an employer is maintaining a work rule that violates the Act, the Board will assess that rule on a case-by-case basis under a highly speculative light. As such, it will be entirely possible for the Board to find that a rule is lawful under one set of circumstances, but find a virtually identical rule is unlawful under a different set of circumstances.
Now is the time to identify and review workplace policies that could affect an employee's ability to engage in protected, concerted activity. In identifying these policies, look at them through the lens of the Board: Could a reasonable employee who wants to engage in Section 7 activity believe that the policy restricts them from doing so? Then, in assessing those policies, document the company's business justifications and determine whether there are ways to tailor the rule more narrowly such that it accomplishes the company's business goals, without potentially impinging on employees' Section 7 rights.
Further, it is vital to stay up-to-date on how the Board is interpreting cases relevant your business and how General Counsel Jennifer Abruzzo is interpreting the law from a prosecutorial standpoint. Here, the Board interjected itself to establish a new standard, even though the rules already had been found unlawful in the underlying case. Employers should anticipate similar types of actions from this activist Board.
While we cannot predict exactly how the Board will ultimately apply this new test, you should take the opportunity now to get ahead of any potential challenges. Reach out to your experienced labor counsel who can provide guidance about identifying and addressing potentially ambiguous policies before they become the subject of litigation.
About Duane Morris
On September 12, 2023, Employment, Labor, Benefits and Immigration Practice Group Chair Eve Klein and Elizabeth Mincer will host a seminar to discuss how this decision affects the development and enforceability of workplace policies and provide practical tips and guidance to employers. Please mark your calendars and visit the Duane Morris Institute website for more information.
For More Information
If you have any questions about this Alert, please contact Eve I. Klein, Elizabeth Mincer, any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.