NLRB Adopts New Standard for Assessing Facial Lawfulness of Employer Work Rules

The National Labor Relations Board (NLRB or the Board), in a 3-1 decision on August 1, 2023, once again overruled existing precedent and declared that all employer work rules that reasonably could be read to restrict Section 7 activity are presumptively unlawful under federal labor law. The decision eliminates the Board’s recent use of rule “categories” to provide clarity to employers and employees and instead adopts a burden-shifting scheme building off earlier Board precedent.

Based on the newly announced standards,[1] employers should review key provisions in their handbooks, employment policies, and work rules to address National Labor Relations Act (NLRA) risk.

Previous Standard

The Boeing Company,[2] which adopted a “categorization” approach to assessing the facial lawfulness of work rules, remained in place for almost six years before being overruled by Stericycle. In Boeing, the Board analyzed the lawfulness of work rules through a balancing test that considered the potential impact on both the employee’s Section 7 rights and the employer’s legitimate justifications associated with the rule.[3]

Boeing classified work rules into three categories: (1) policies that were always lawful, (2) policies that were subject to individualized scrutiny, and (3) policies that were always unlawful. Id.

Boeing overruled the prior test in Lutheran Heritage Village-Livonia,[4] which found rules facially unlawful if an employee could reasonably interpret a work rule to restrict Section 7 activity, and without general consideration of employer interests for the rule. The Lutheran Heritage test led to considerable uncertainty and different litigation outcomes based on similar policy language, which Boeing sought to, and in many cases did, eliminate. 

New Stericycle Standard

The Board majority in Stericycle resurrected the basic Lutheran Heritage standard and abandoned the three-category framework created by Boeing. The Board majority stated that the agency will instead conduct “a particularized analysis of specific rules, their language, and the employer interests actually invoked to justify them.”[5]

The Board majority adopted a “rebuttable presumption” rule, under which the Board is more likely to find that the maintenance of any rule will be unlawful whenever it can theoretically be read to restrict any type of hypothetical future NLRA-protected conduct.[6]

Unlike Lutheran Heritage, and at least superficially like Boeing, the Stericycle standard states explicitly that the Board will consider whether a particular rule “advances a legitimate and substantial business interest” as part of its analysis.[7] Ostensibly, this appears to retain the most important employer-friendly improvement made by the Board in Boeing. 

However, this change is subject to other challenging aspects of the new Stericycle standard. In application, the Stericycle standard—when considered as a whole—is likely to be applied by the Regional offices, General Counsel, and the NLRB in a manner that invalidates many common-sense and ordinary work rules, employment policies, and employee handbook provisions previously deemed lawful under Boeing for the following reasons: 

• The initial General Counsel initial burden is low. A rule will be presumptively unlawful if the General Counsel shows that a rule “has a reasonable tendency to chill employees from exercising their Section 7 rights.”[8]
• The initial burden is also described as being whether “an employee could reasonably interpret the rule to have a coercive meaning,” and this burden will be deemed satisfied “even if a contrary, noncoercive interpretation of the rule is also reasonable.”[9]
• When determining whether a rule is presumptively unlawful, “the Board will interpret the rule from the perspective of an employee who is subject to the rule and economically dependent on the employer,” who fears being disciplined, and “a typical employee interprets work rules as a layperson rather than as a lawyer.”[10]
• When evaluating whether the General Counsel satisfies the initial burden, “the employer’s intent in maintaining a rule is immaterial.”[11]
• Even if an employer proves that a “legitimate and substantial business interest” exists and is advanced by a particular work rule, employment policy, or employee handbook provision, maintenance of the rule, policy, or handbook provision will still violate the NLRA unless the employer can prove it was impossible to adopt a “more narrowly tailored rule.”[12]

Practical Considerations

Stericycle is an important decision for US-based employers covered by the NLRA because of its potentially far-reaching impact on existing employment policies and work rules. The Stericycle standard will likely be more difficult for employers to comply with due to its ambiguity and presumptive approach.

That said, the Board majority recognized that it will consider “any explanations or illustrations contained in the rule regarding how the rule does not apply to Section 7 activity,”[13] which signals that careful drafting will matter. 

We recommend that during any review of existing or new employment policies or rules employers address the Stericycle decision and narrowly draft policies that could implicate the wide spectrum of NLRA activity (not only union activity, but also any employee activity considered protected and concerted). Employers should insert disclaimers and/or illustrations for any provision that arguably could be read to restrict such activity.

The following work rules in particular should be reviewed as soon as feasible as they are likely the greatest source of liability, absent modification:

• Restricting disclosure of confidential information
• Use of employer technology and tools
• Social media and related activities
• Media and third-party engagement
• Solicitation and distribution rules
• Photography/recording policies
• Anti-harassment policies
• Employee disciplinary rules
• Appearance/dress code policies
• Open-door/internal complaint policies

Employers should also consider developing written business justification defining the need for the applicable rule “as is”—and citing contemporaneous evidence and incidents that justify the rule—that could be used during an NLRB investigation or litigation.