Listen to this post

The National Labor Relations Board has continued its recent spate of employee-friendly decisions with a new one that will require employers to think through work rules, policies and handbook provisions to determine whether they could–hypothetically, from an employee’s perspective–restrict an employee’s Section 7 rights. 

On August 2, 2023, the National Labor Relations Board (“NLRB” or “the Board”) issued a 3-1 split decision in Stericycle, Inc., bringing back and modifying a prior standard for assessing whether an employer’s facially neutral work rules and policies unlawfully “chill” an employee’s Section 7 rights. Under the new standard, the NLRB will peer through the lens of a “reasonable employee” (more on that below) to determine whether an employer’s work rules and policies have a tendency to restrict Section 7 rights. For employers, this means a complete reassessment of their workplace rules and policies–and the handbooks that those rules and policies are housed in.

The new standard: reasonable tendency to “chill” Section 7 rights, from the employee’s perspective

The new standard (which is the Board’s prior Lutheran Heritage standard, brought back to life and modified) requires the NLRB General Counsel to prove that a challenged work rule has a reasonable tendency to “chill” employees from exercising their Section 7 rights. (Quick reminder: Section 8(a)(1) of the National Labor Relations Act (NLRA) makes it an unfair labor practice for an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7” of the Act, including the right to form, join or assist labor unions, to bargain collectively and to engage in other concerted activities for the purpose of collective bargaining.)

How is this done? That’s the rub for employers.

As an initial matter, the Board will interpret the challenged work rule from the perspective of an employee who is (i) subject to the rule, (ii) economically dependent on the employer, and (iii) also contemplates engaging in a protected concerted activity.

In addition:

  • The employer’s intent in maintaining the rule in question is immaterial. (So even if the employer had no  intent to restrict an employee’s Section 7 rights when developing the work rule or policy–which we suspect will usually be the case–it isn’t material.)
  • The General Counsel will carry her burden if an employee (that same employee described above) could reasonably interpret the rule to have a coercive meaning–even if a contrary, non-coercive interpretation of the rule is also reasonable. All emphasis is ours here, to highlight that the General Counsel’s burden is extraordinarily low. If the General Counsel carries her burden, the challenged work rule is presumptively unlawful.
  • BUT, employers have a chance at rebutting the presumption. The presumption can be rebutted if the employer can prove that the rule advances a legitimate and substantial business interest and that the employer cannot advance that interest with a more narrowly tailored rule. If the employer proves this, the work rule will be found lawful.

What does this mean for employers?

The Stericycle standard has the potential to render a multitude of employment policies and workplace rules unlawful, and will be applied retroactively. Employers should review existing (or new) employee work rules, policies, and handbook provisions to ensure:

  • They are tailored as narrowly as possible to advance the employer’s interest, and to refrain from restricting an employee’s Section 7 rights
  • They explicitly state employees have the right to engage in concerted activities under Section 7
  • Where necessary, they provide an explanation of how the rule or policy does not preclude employees from exercising their Section 7 rights
  • Where possible, they include a list of specific rights the employer is not intending to restrict. Talk to us for recommended language.

Will a safe harbor help?

The lone dissenter, Member Marvin Kaplan, stated that under Stericycle it is “virtually impossible to craft work rules that are general enough to serve their intended lawful purpose without being susceptible to an interpretation that infringes on Section 7 rights.” He noted that the only predictable way for employers to insulate their work rules from Board invalidation would be to add a legally sufficient disclaimer to handbooks, stating that none of the rules contained in the handbook applied to Section 7 activity.

The majority declined to address a safe harbor head-on, responding there was no “safe harbor” issue presented in the case, but that in considering whether a rule reasonably tends to chill an employee from exercising statutory rights or is sufficiently narrowly tailored, the Board will evaluate any explanations or illustrations contained in a work rule explaining why the work rule does not apply to Section 7 activity. (See our recommended action items above, and reach out to our team for assistance.)

Interested in how the NLRB got here?

For those who are interested, here’s a quick (truncated) trip down memory lane leading to Stericycle.

  • In Lutheran Heritage Village-Livonia (2004) (the decision that the Board revived and modified in Stericycle), the Board ruled that an employer’s work rules or policies that did not explicitly restrict Section 7 activities still violated the NLRA if (among other factors) employees would “reasonably construe” the language to prohibit Section 7 activity.
  • Then, in Boeing Co. (2017), the Board overturned Lutheran Heritage’s “reasonably construe” standard and delineated a framework for determining whether a facially neutral policy, rule or handbook provision, when “reasonably interpreted,” potentially interfered with employees’ exercise of their rights under the NLRA. The Board used a two-factor test to evaluate work rules under Boeing: (i) the nature and extent of the potential impact on NLRA rights, and (ii) legitimate justifications associated with the rule’s requirements. If the justifications for a rule outweighed potential restrictions, it would be found lawful. As cases were decided under Boeing, the Board placed employment rules and policies into categories, finding some categories do not interfere with an employee’s exercise of Section 7 rights–such as a rule prohibiting employees (including managers and supervisors) from providing a written or oral employment reference or supplying information concerning current or former employees without the HR department’s permission. 
  • And in LA Specialty Produce (2019), the Board clarified a tenet of Boeing: that if a rule, reasonably construed, would not restrict employees’ protected activities, the analysis ends, and the rule must be considered valid. The Board emphasized that this test is met only when a “reasonable employee,” rather than an NLRA subject matter expert (such as a labor lawyer) would read a rule to restrict protected activities–meaning the Board should not look to find any and all potential applications of a work rule that could restrict activity protected under the NLRA. The Board also stressed that the general counsel had the burden to show that the questioned work rule actually did interfere with employee rights under the Act.

And now, Stericycle. Reach out to us for help with this decision (we’re already in the weeds on this one), and for all of your other labor and employment law needs.