National Labor Relations Board Will Scrutinize Employee Handbook Policies Under New Standard

The National Labor Relations Board (Board) on August 2, 2023 announced a new and intrusive standard for evaluating whether many commonplace work rules and employee employment handbook provisions actually violate the National Labor Relations Act (Act). The Board’s decision in Stericycle, Inc. and Teamsters Local 628, 372 NLRB No. 113 adopts “a new legal standard to decide whether an employer’s work rule that does not expressly restrict employees' protected concerted activity under section 7 of the National Labor Relations Act is facially unlawful [under the Act].” The Board’s decision will apply retroactively in both unionized and non-union workplaces in the private sector (except for agriculture). The disputed work rules in Stericycle governed “personal conduct, conflicts of interest and confidentiality of harassment complaints.” 

A Work Rule May Be Unlawful if It Could Be Interpreted to Chill Protected Conduct

Under the Board’s new standard, a rule that “has a reasonable tendency to chill employees from exercising their Section 7 rights” will be found to be unlawful. In determining the lawfulness of a rule, the Board will now determine whether a “reasonable employee . . . could reasonably interpret the rule to have a coercive meaning . . . even if a contrary, noncoercive interpretation of the rule is also reasonable.”  (emphasis supplied). A “reasonable employee” is one who is “economically dependent” on the job but considering “concerted activity:” either union organizing or simply acting in concert with others regarding wages, hours or working conditions. If the Board makes such a determination, then the rule is presumptively unlawful. The employer, however, may “rebut that 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.” Under this standard, the employer’s intent in adopting or enforcing a rule is “immaterial.”

The Board Overrules Employer-Friendly Decisions and Expands an Earlier Standard

The Stericycle decision is an extension of the Board’s 2004 decision in Lutheran Heritage Village-Livonia, 343 NLRB No. 646 (2004). Under that decision, a work rule violated the Act if an employee reasonably would construe the rule to prohibiting the exercise of rights protected by the Act. The key difference between the Lutheran Heritage decision and the Board’s new standard in Stericycle is that, under the new standard, a rule will be found to be unlawful if an employee could reasonably interpret the rule to have coercive meaning, while the older, Lutheran Heritage standard had required proof that a reasonable employee would find the rule coercive. 

Lutheran Heritage has not been the standard since it was overruled by a Trump-era Board in Boeing Company, 365 NLRB No. 1544 (2017). The Boeing Board required consideration of (1) the nature and extent of the rule’s potential impact on the rights under the Act, and (2) the employer’s legitimate justification for the rule. 

However, in Stericycle, the Board repudiated the Boeing test [and a subsequent Trump-era decision, LA Specialty Produce Co., 368 NLRB No. 93 (2019)], stating its belief that the “primary problem with the standard from Boeing and LA Specialty Produce is that it permits employers to adopt overbroad work rules that chill employees’ exercise of their rights under Section 7 of the Act.”

The Employer Will Have, in Many Cases, a Difficult Burden to Shoulder

Now, under Stericycle, if the hypothetical, reasonable employee could find the rule coercive (meaning that the rule could discourage protected concerted activity – such as union organizing or discussions among employees regarding their wages or working conditions), then the employer's rule will be deemed unlawful, unless the employer proves 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.”

As a practical matter, in many cases it will be difficult for the employer to show a “more narrowly tailored rule” is impossible. Doing so would be to prove a negative. And most competent lawyers for an employee, or for the Board’s General Counsel, can conceive of a “more narrowly tailored” rule that theoretically would “advance” whatever interest the employer’s rule is designed to achieve.

A Broad Scope of Work Rules Will Be Affected

This decision can apply to almost any work rule contained in almost any employee handbook or elsewhere. Rules concerning civility in the workplace, abusive, bullying or harassing conduct, social media activity, off-duty conduct, access to the employer’s premises by off-duty employees, contacts with the media, dress codes, and even some safety rules, among many other rules, will be subject to challenge. Further, the Board ruled in its February, 2023 McLaren Macomb decision that it views as presumptively unlawful most non-disparagement and many confidentiality provisions in separation agreements. See McLaren Macomb, 372 NLRB No. 58 (2023). And the Board’s General Counsel has announced she intends to challenge most forms of post-employment covenants not to compete. All of these widely used rules and provisions may presumptively violate the Act.

Employers, Whether Unionized or Not, Must Evaluate the Effect of the Stericycle Decision

The ruling in Stericycle is retroactive to all pending cases. The outcome was unsurprising in some respects, because the current Board has embarked on a large-scale reversal of Trump-era decisions. 

Employers, whether unionized or not, should review their employee handbooks, written policy statements, separation agreements, nondisclosure agreements and many other types of widely used documentation, in light of the recent Board decisions. 

Many employers will include “savings” clauses in their work rules, clarifying the lack of intent to restrict protected activity. But, at present, no Board-approved “savings” language exists. We recommend any such provision identify the type of activity protected, be included immediately after the rule’s prohibition on conduct, and not simply refer to “protected conduct” or to “section 7 rights” under the Act. 

For more information on how the new NLRB standard may affect your current policies, employee handbooks, agreements, and other forms of documentation, please contact your Quarles attorney or:

• George Howard, Jr.: (619) 243-1577 / george.howard@quarles.com
• Christian Yingling: (202) 780-2654 / christian.yingling@quarles.com

Please watch your inbox for an invitation to an upcoming Quarles webinar that will further discuss this NLRB standard and other important labor and employment law developments.