August 10, 2023

Employers Beware: NLRB Overrules Precedent to Adopt Standard Critical of Employer Workplace Rules

Written By

Amy L. Miles
Member, Stoll Keenon Ogden PLLC

On August 2, 2023, the National Labor Relations Board (“NLRB” or “Board”) issued a landmark ruling that overturned precedent and adopted a new burden-shifting standard for determining the lawfulness of employer rules in the workplace. The decision has the potential to invalidate workplace rules maintained by employers, regardless of whether they are unionized or not. Employers should carefully review their employee handbooks and policies in light of the decision.

The Board’s Updated Standard Adopted by Stericycle  

The NLRB’s decision in Stericycle adopts a new standard for evaluating whether employer work rules infringe upon employees’ rights under Section 7 of the National Labor Relations Act (“NLRA”). Under Section 7 of the NLRA, employees have the right to form, join, or assist a labor union; to bargain collectively through representatives of their choosing; and to engage in concerted activities for the purpose of collective bargaining or mutual aid or protection. Under the new Stericycle standard, the Board analyzes whether an employee “could reasonably construe” the rule or policy as chilling protected conduct under Section 7.  The decision overturns the two-factor balancing test the Board had previously adopted in Boeing and returns to a modified test similar to its Lutheran Heritage standard, which was in effect before Boeing.

In 2004, the Board issued a landmark decision in Lutheran Heritage which held that employer workplace rules cannot stand if “employees would reasonably construe the language to prohibit Section 7 activity.” In 2017, the predominantly Trump-appointed Board overturned Lutheran Heritage and held in Boeing that the lawfulness of work rules was subject to a balancing test that considered the potential impact to the rights of employees against the legitimate employer justifications of the rule. The Boeing approach gave deference to employers’ legitimate business interests in maintaining workplace policies. However, according to the Stericycle Board, the Boeing approach gave too much weight to the interests of employers and failed to account for the economic dependency of employees on their employers.

Thus, the Stericycle Board rejected the Boeing balancing test in favor of a more expansive interpretation of employee rights under Section 7. Under Stericycle, a seemingly neutral workplace rule is considered presumptively unlawful if an employee could reasonably interpret the rule to have a coercive meaning. Once this showing is made, the employer may then attempt to rebut that presumption of unlawfulness by showing that the rule advances a “legitimate and substantial business interest” that cannot be advanced by a more narrowly tailored rule. In other words, an employer must adopt the least restrictive rule possible to advance its legitimate business interest.

The Board’s decision goes further than Lutheran Heritage and previous, similar holdings adopted by left-leaning Boards. Under Stericycle, a rule is evaluated from the perspective of an economically dependent employee. Therefore, if a rule could have a coercive meaning from the perspective of the employee, it is presumptively unlawful. The employer’s intent in maintaining a work rule is immaterial.

How Should Employers Respond to the Stericycle Decision?

The Stericycle decision has broad application that impacts nearly all employers. The standard applies whether or not an organization’s employees are represented by a union. Additionally, the Board made clear that the decision applies retroactively to both pending workplace rule challenges and workplace rules currently in place.

Employers should immediately review all workplace rules and policies to ensure compliance with the NLRB’s new standard. If a policy could be construed as coercive and chilling of an employee’s Section 7 rights, it should be revised to the least restrictive rule possible in order to comply with Stericycle. Workplace civility rules, confidentiality provisions, restrictions on employees’ use of social media, and restrictions on video and cell phone recording are just a few of the many workplace policies that likely need to be reviewed and rewritten to be aligned with the new Board standard. Employers that violate the law may be subject to make-whole remedies, including potential back pay or consequential damages for employees who are wrongfully terminated.

The attorneys in Stoll Keenon Ogden’s Labor, Employment & Employee Benefits practice are able to assist with questions related to the Board’s decision or are prepared to conduct a thorough review of your Employee Handbook or company policies.

Stoll Keenon Ogden’s Labor, Employment & Employee Benefits practice has a proven record of being trusted advisors and effective advocates. We help employers solve their problems through proactive counseling, employee training and, where possible, cost-efficient litigation, including alternative dispute resolution. We know the employment laws thoroughly, and we make it our goal to acquire a comprehensive knowledge of our clients and their business, so we can provide tailored solutions for each of their needs.

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