On August 2, the National Labor Relations Board issued the Stericycle, Inc. decision, in which it reinstated a modified version of the Board’s pro-employee Lutheran-Heritage standard for scrutinizing employer workplace rules. Under this new standard, a rule or policy is “presumptively unlawful” if it tends to chill employees from engaging in protected conduct under Section 7 of the National Labor Relations Act (“NLRA”). In such cases, the new standard requires employers to demonstrate that the rule advances a legitimate and substantial business interest that cannot be advanced by a more narrowly tailored rule.
Employers should carefully review and evaluate their workplace rules and policies for compliance and prepare for potential challenges those rules and policies.
The Lutheran Heritage Standard
The Board first adopted the Lutheran Heritage standard in 2004, in a purported effort to prohibit work rules that would tend to chill employees’ exercise of their Section 7 rights. Lutheran Heritage Village-Livonia, 343 NLRB 646. Under Lutheran Heritage, a facially neutral workplace policy would violate the NLRA upon a showing of one of the following: (1) employees would “reasonably construe” the language to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule was applied to restrict the exercise of Section 7 rights.
Following its decision in Lutheran Heritage, the Board found unlawful many otherwise neutral policies, including rules prohibiting the use of cameras in production areas, disruptive behavior in the workplace, and rules limiting employees’ ability to speak to the public or media.
The Boeing and LA Specialty Produce Standard
The Board’s Stericycle decision overrules its 2017 decision in Boeing Co., which had overruled the Lutheran-Heritage decision. The Boeing Board established a balancing test for determining whether a facially neutral work rule was unlawful, which considered both the “nature and extent of the potential impact” on employee’s NLRA rights alongside an employer’s “legitimate justifications associated with the rule.” As part of its framework, the Board established a categorical approach in which workplace rules would fall into one of three buckets:
- Category 1. Rules that are always lawful to maintain because, under any reasonable interpretation, the rules would not interfere with NLRA rights or because the potential adverse impact on protected rights would be outweighed by justifications for the rules.
- Category 2. Rules that warrant individualized scrutiny in each case because the impact on protected rights may outweigh any legitimate justifications.
- Category 3. Rules that are always unlawful to maintain because any legitimate justification for the rules would be outweighed by the chilling effect on NLRA rights.
In LA Specialty Produce (2019), the Board clarified three points regarding its Boeing ruling: (1) the NLRB General Counsel bore the burden of proving that a reasonable employee could interpret the rule to interfere with NLRA rights; (2) if the General Counsel met that burden, then the Boeing analysis required a balancing of the two parts of the test, which could result in certain types of rules being broadly applied to fit within Categories 1 and 3; and (3) in some instances, the analysis would not permit broader application beyond the specific circumstances of the rule at issue (Category 2 rules).
The Stericycle Decision
The Stericycle Board upended the Boeing framework, overruling Boeing and its progeny, including LA Specialty Produce and Apogee Retail (2019), which held that rules requiring employees to maintain confidentiality of workplace investigations were categorically lawful. The Board justified doing so because, in its view, “Boeing gave too little consideration to the chilling effect that work rules can have on workers’ [NLRA] rights.”
In place of Boeing’s balancing test, the Board established a two-step analysis. Under the first step, the General Counsel must clear an initial (low) bar of proving that an employee “could reasonably interpret the rule to have a coercive meaning,” leading to a chilling effect on protected activity. Specifically, the Board will assess “the specific wording of the rule, the specific industry, and workplace context in which it is maintained, the specific employer interests it may advance, and the specific statutory rights it may infringe.” In doing so, the Board will analyze a rule from the “perspective of the economically dependent employee [on their employer] who contemplates engaging in Section 7 activity.” Under this framework, a rule is presumptively unlawful if it has a “reasonable tendency” to chill employees’ exercise of Section 7 rights. Notably, the employer’s intent in establishing a rule is entirely immaterial. Thus, a rule may be presumptively unlawful, “even if a contrary, noncoercive interpretation of the rule is also reasonable.”
If a party challenging a work rule carries its low burden, the rule is “presumptively unlawful,” which an employer must rebut by demonstrating both (1) the rule advances a legitimate and substantial business interest and (2) the rule could not be replaced with a more narrowly tailored one. If the employer can meet this burden, the rule will be found lawful. There is little guidance, however, what the Board will consider a sufficiently legitimate and substantial interest to overcome the presumption.
Employers must scrutinize all workplace rules, policies, and procedures—current and future—through the lens of the new Stericycle test and brace for unfair labor practice charges and litigation on any and all rules in place. Specifically, employers should first consider whether the rule has any potential whatsoever to chill protected activity—namely, any concerted activity that could concern employees’ right to self-organization, to form, join, or assist labor organizations. Under its current makeup, the Board likely will take a broad view of what constitutes protected activity as well as what rules could reasonably chill such activity. Given that and without additional guidance at this point, it is probably safe to assume the rule will be deemed presumptively unlawful. Accordingly, employers should always be prepared to demonstrate both requirements under the second step.
In particular, employers should next consider the reason for the rule, asking what legitimate business reason would exist to justify the rule if scrutinized by the Board and whether the rule could be more narrowly tailored. For example, as the General Counsel explained in a 2015 memorandum providing guidance on the Board’s application of the Lutheran Heritage standard, employers could maintain work rules requiring employees to abide by employer policies and to cooperate fully in investigations that the employer may undertake. As explained in the 2015 memorandum, the employer should make clear that the policy regarding cooperation applies only to investigations of workplace misconduct, rather than investigations of unfair labor practices or other protected activity. Importantly, when adopting and implementing such policies, employers should create documentary evidence of the justification of the work rules and that it is as narrowly tailored as possible to achieve the business interest. This documentary evidence should reflect the employer’s justification and internal discussion from the inception of the rule through its implementation.
Regardless of their diligence, however, employers must prepare for the potential that this new framework will allow nearly any workplace rule to be interpreted as interfering with NLRA rights and protections. Employers should monitor Board activity on this issue, as rulings striking down workplace rules as unlawful likely will continue for as long as the current Board is in place. It is still unclear whether the Board’s decision will be appealed. In the meantime, however, the decision is enforceable and employers should ensure their work rules and policies are compliant.