ALL EMPLOYERS BEWARE: Previously Lawful Employer Rules May Now Violate the NLRA Even in Non-Unionized Workplaces

On August 2, 2023, the National Labor Relations Board (NLRB or the Board) decided a case called Stericycle, Inc. This case is the latest in what has been a continued effort to roll back precedents set under the Trump administration. In Stericycle, Inc., the Board reversed a 2017 decision that addressed how to analyze whether employer rules infringe on employees’ rights under the National Labor Relations Act (NLRA) to engage in concerted activities. The Board explained that it will examine rules from the perspective of an employee who is economically dependent on the employer to determine if an employee could reasonably interpret the rule to restrict or prohibit his or her rights protected under the NLRA. If it does so, the rule will be found unlawful, unless the employer can prove that it has a legitimate and substantial business interest that cannot be accomplished with a more narrowly tailored rule.

To learn more about this change, join Steptoe & Johnson for a webinar on August 23. Click here to register.

The Board’s Varying Interpretation of Employer Workplace Rules
Section 7 of the NLRA protects employees’ rights to form and join unions, and their right “to engage in other concerted activities for the purpose of . . . mutual aid or protection.” It is critically important to understand that the NLRA is not limited to union workforces. It applies to all employers, which means that yesterday’s decision by the Board potentially impacts all employers. For example, any employer with a rule limiting nonsupervisory employees covered by the NLRA from discussing wages and working conditions is vulnerable to scrutiny by the Board.

Some historical context may help with understanding the significance of yesterday’s ruling. In 2004, in a case called Lutheran Heritage, the Board held that unless a rule explicitly limits rights under the NLRA, its analysis of a rule would take into consideration whether (1) employees would “reasonably construe” the rule to prohibit protected activity, (2) the rule was promulgated in response to union activity, or (3) the rule was applied to restrict protected activity. The Board also acknowledged that employers have legitimate business purposes in regulating employee conduct in the workplace.

Lutheran Heritage was the precedent followed until 2017 when the Trump Board decided a case called Boeing Co. In that case, the Board held that if a rule appeared neutral (in other words, it did not explicitly seek to limit rights under the NLRA), the Board would examine the rule’s nature and the extent of its potential impact on protected rights and the employer’s legitimate justification for the rule. The Boeing Co. decision also created three categories of workplace rules: (1) those that are always lawful to maintain either because they do not infringe on employees’ Section 7 rights or because any impact was outweighed by employer justifications; (2) those that are sometimes lawful to maintain, which warrant scrutiny in each case; and (3) those that are always unlawful to maintain. In particular, in the Boeing Co. decision, the Board held that the rules at issue in that case — restricting the use of cameras in the workplace and requiring employees to abide by basic standards of civility — fell into the first category and were always lawful to maintain.

The Board’s New Standard
Yesterday, in Stericycle, Inc., the Board reversed the Boeing Co. decision and adopted a new standard. As previously explained, the new standard puts the focus on the economic dependency of employees on their employers, something the Board felt was not sufficiently considered in the past. The Board also explained that it believes Boeing Co. did not require employers to narrowly tailor their rules only to promote their substantial and legitimate business needs while avoiding burdening protected employee rights. None of the explanations for the new standard portend good results for employers in the future when Stericycle, Inc. is applied to new cases.

For employers, knowing that the Board will interpret rules from the perspective of a reasonable employee who is economically dependent, and knowing that the Board feels that such an employee is more inclined to interpret an ambiguous rule as prohibiting protected activity, the time has arrived to assess rules before they are called into question before the Board. Even ambiguous rules will be difficult to defend if the Board’s General Counsel can meet the burden of proof merely by showing that the rule has a reasonable tendency, from employees’ perspectives, to chill the exercise of protected rights, even if the employer did not intend for its rule to restrict employee rights.

Employers should not be quick to pin their hopes on the fact that the Board in Stericycle, Inc. rejected the idea that some rules are categorically unlawful, choosing instead to go with a case-by-case approach examining the specific language of the rule, the specific industry and workplace context, the specific employer interests it may advance, and the specific rights it may infringe. All that sounds good, but the fact remains that if a rule is found to have a tendency to chill employees’ rights, unless an employer can show both that the rule advances a legitimate and substantial business interest and that the rule is as narrowly tailored as it can be in order to accomplish that purpose, the rule will be held to be unlawful.

The Bottom Line
Looking ahead, the Board will scrutinize workplace rules and employee handbook policies more closely than it has in recent years. To repeat — this impacts all employers, not just those with unionized workforces. Importantly for employers, workplace rules that were previously held to be permissible — such as restricting photography in the workplace or requiring civil conduct — may now be unlawful if a reasonable employee could interpret the rules as chilling protected rights. This outcome is particularly likely if the rules could be more narrowly tailored to protect the employer’s interests. All employers should reevaluate their workplace rules with an eye on the new standard and revise them where appropriate.

Steptoe & Johnson’s Labor Relations Team is ready and able to help you review and, if necessary, revise any rules/policies given this development.