NLRB Adopts Tough New Standard for Workplace Rules

On August 2, 2023, in Stericycle, Inc., 372 NLRB No. 113 (2023), the National Labor Relations Board adopted a strict new legal standard for evaluating the validity of workplace rules under the National Labor Relations Act (“the Act”).

In Stericycle, the Board majority overruled The Boeing Co., 365 NLRB 154 (2017), its prior standard under which rules, policies and handbook provisions were treated either as categorically lawful or as subject to a balancing test that weighed their tendency to restrict employee rights against the business needs justifying them.  The Boeing Co. test, in turn, had replaced Lutheran Heritage Village-Livonia, 343 NLRB 646 (2004), which declared unlawful any workplace rule that “would reasonably be interpreted” by employees as limiting protected activities.  The Lutheran Heritage standard was used in the Board’s well-publicized war against employer handbooks during which the agency targeted commonly adopted rules and policies including, among many others, those promoting civility, courtesy, and productivity, and prohibiting harassing, disruptive, and insubordinate workplace conduct.

The Board’s latest new standard returns to case-by-case review of rules and heightens its scrutiny of policies in at least two important ways.  First, the Board now considers a rule presumptively unlawful if it “could” (rather than “would”) be interpreted to limit employee rights, meaning rules may be invalidated even if there are alternative interpretations that are consistent with employee rights.  As the Board itself has noted, rights under the Act are broadly defined, continually evolving and not susceptible to being specifically enumerated.  The Board may find a rule invalid based on potential interference with activities that were not, or could not have been, foreseen by the employer when drafted, and even if the rule was never interpreted or applied in an unlawful manner.

Second, whether a rule implicitly limits protected activities under the new standard will not be considered from the standpoint of a “reasonable” employee, as it was under Lutheran Heritage, but instead based on the perspective of someone “economically dependent” on the employer who considers engaging in activity protected by the Act.  As a result, rules that are appropriate under ordinary workplace circumstances may be found improper by the Board specifically in the context of a theoretical employee considering organizing or engaging in other concerted activities but fearful of doing so.

The Board’s characterization of a “state of economic dependency” in the workplace implies that any workplace rule even arguably limiting employee rights is illegally coercive.  The Board’s decision does acknowledge there may be competing justifications for maintaining such rules.  Under its new standard an employer can overcome the presumption of unlawfulness if it is able to prove both that a rule advances a “legitimate and substantial business interest” and that the employer is unable to achieve that interest with any narrower rule.

When defending a rule that the Board claims could be viewed as restrictive of employee rights, an employer will have the burden of establishing the justification for its rule and also demonstrating that justification cannot be accommodated by any more narrowly defined rule.  The Board’s decision does not discuss the justifications asserted for the rules in the Stericycle case, but remands it to an administrative law judge for further proceedings without further guidance about the evidentiary burden that the employer must meet.  The Board also did not specify how a rule must be tailored to the employer’s demonstrated legitimate interest.  Given the varied ways that rules are written by different employers, the Stericycle approach means consistent outcomes cannot be predicted even for similar rules that are based on common, substantial justifications.  The Board’s new standard thus seems to require litigation over the specific terms of virtually any rule with labor relations implications.

Practical Implications of the Decision for Employers

Stericycle represents a drastic change from prior law.  The Board will no longer treat categories of rules as appropriate but will separately scrutinize discrete provisions in employee handbooks on their own merits.  The new standard construes rules from the idiosyncratic perspective of federal labor law and its very broad and evolving definition of protected, concerted activities.  It assumes coercion based on presumed “economic dependency” in the workplace and invites litigation about competing interests under an undefined standard. 

Should the Board find a work rule unlawful under Stericycle, the employer must timely remove, redact, or replace unlawful language and post and distribute notices to employees acknowledging the violation and providing information about their rights under the Act.  The Board’s finding that an unlawful rule has been maintained may also have complex downstream effects.  Overly broad rules may be treated by the Board as unintentional evidence of discriminatory animus, muddying the stated reasons for discipline of an employee when applied to a given case.  Maintaining an unlawful rule during an organizing campaign may result in the Board’s invalidating an election where employees rejected union representation and ordering a rerun.  Employers facing organizing efforts should definitely prioritize review of their workplace rules and policies prior to the filing of an election petition.

Employers should establish a regular, periodic review of their workplace rules with an eye toward the Board’s new standard, to ensure that they prevent misunderstandings, avoid unintended interference with protected activities, and tailor the foreseeable effects of the rules on employee rights to demonstrable, legitimate, and substantial business justifications.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.