National Labor Relations Board

In a much anticipated (yet thoroughly unsurprising) decision, on August 2, 2023, the National Labor Relations Board (NLRB or Board) again reversed precedent, crafting a what’s-old-is-new-again standard for evaluating – and easily invalidating – employer work rules. The long and short of the Board’s decision in Stericycle, Inc. is that employers can now expect, much as they did prior to 2017, that the NLRB will declare unlawful many commonplace, and common sense, employer rules designed to foster a productive and harmonious work environment.

Some context is necessary before diving straight into the decision. Prior to 2017, the NLRB evaluated whether employer rules, such as those often found in employee handbooks and codes of conduct, interfere with, restrain, or coerce employees in their right to engage in union or other protected concerted activities (what are known as “Section 7 rights”) under a standard first announced in Lutheran Heritage Village-Livonia. Under that standard, a workplace rule was unlawful if an employee could interpret the rule in such a way that would “chill” the employee from engaging in protected activities. Employers loathed this standard because it permitted the NLRB to declare unlawful reasonable rules, such as those relating to surreptitious recording of conversations, confidentiality and non-disclosure, contact with the media, internet use, and others, even if the NLRB’s interpretation seemed far-fetched and predicated purely on hypotheticals, without evidence of the workplace conduct rule’s actual infringement on the exercise of protected employee rights.

In 2017, a Republican majority NLRB overruled Lutheran Village and established in its place a sensible framework for evaluating employer workplace rules. In Boeing Co. (as later clarified in a case called LA Specialty Produce Co.), the NLRB said it would no longer presume improper interference with employee rights, and instead would focus its attention on the actual nature and extent of a rule’s impact on Section 7 rights, balancing that impact against the employer’s legitimate interests and justifications for the rule. The NLRB’s Boeing decision created three categories of employer rules:

  • rules that, when reasonably interpreted, do not interfere with the exercise of National Labor Relations Act (NLRA) rights, or the potential adverse impact on protected rights of which is outweighed by justifications associated with the rule;
  • rules that warrant individualized scrutiny in each case as to whether the rule would prohibit or interfere with NLRA rights, and if so, whether any adverse impact on NLRA-protected conduct is outweighed by legitimate justifications; and
  • rules that are unlawful because they would prohibit or limit NLRA-protected conduct where the adverse impact on NLRA rights is not outweighed by justifications associated with the rule.

Employers welcomed the Board’s revised approach as it struck an appropriate balance between employees’ Section 7 rights and employers’ rights. The tests announced in Boeing/LA Specialty Produce jettisoned the skewed approach of Lutheran Heritage, which effectively rendered unlawful workplace rules that could hypothetically be interpreted to impair employees’ Section 7 rights regardless of the employer’s justification for adopting or enforcing the rule.

All was fine, until the current Democrat-majority NLRB was presented an opportunity to reverse course, which it did in Stericycle. Although the NLRB did not completely revive the Lutheran Heritage standard, practically speaking, the Board breathed new life into it, announcing the NLRB’s position that, if a workplace rule is shown to have a “reasonable tendency” to chill employees from exercising Section 7 rights, it is presumptively illegal. Whether a rule has such a tendency is to be interpreted, says the Board, “from the perspective of an employee who is subject to the rule and economically dependent on the employer, and who also contemplates engaging in protected concerted activity.” Consequently, the Board said it would deem the employer’s intent in maintaining the rule “immaterial;” what matters is only whether the employee could interpret the rule to have a coercive effect, even if the rule could also be reasonably interpreted as non-coercive. Once a rule is deemed to presumptively be illegal, the employer can only rebut that presumption by proving that the rule advances “a legitimate and substantial business interest” and that this interest could not be advanced by a more “narrowly tailored” rule.

The Board majority issuing the Stericycle decision – over the dissent of the NLRB’s sole Republican member – justified its resurrection of the nebulous pre-Boeing analysis discarded by the Board just six years ago by claiming that the Boeing decision gave “too little weight to the burden a work rule could impose on employees’ Section 7 rights” and “too much weight to employer interests.” But what the Board has fashioned instead is not a rule giving fair and equal weight to employee and employer interests, but rather a rule that stacks the deck against employers by setting a very low bar for proving presumptive illegality and a nearly insurmountable bar for employers to prove (over Monday-morning quarterbacking claims to the contrary) that they could not have achieved the desired “legitimate and substantial business interest” addressed by the rule with a more “narrowly tailored” rule.

So, now gone are the sensible and proven-workable Boeing categories of rules. In their place, the NLRB has restored its murky concept of “reasonable tendency to chill” employee rights, overlaid with the even more unpredictable element of asking whether a more “narrowly tailored” rule would have equally served the employer’s interests, assuming, of course, the Board deems those interests both “legitimate” and “substantial.” If the Board’s past application of the Lutheran Heritage standard is any indication of how the NLRB will apply Stericycle, employers can expect the Board to resume its micromanagement of the workplace, seeking out and declaring illegal reasonable, commonsense workplace rules in the purported interest of safeguarding theoretical Section 7 interests which might or could be impacted by those rules.