NLRB Increases Scrutiny of Employment Policies, Further Expanding Regulation of Non-unionized Employers

Last week, the National Labor Relations Board (“NLRB” or the “Board”), best known for its oversight of union elections and interactions between employers and labor unions, expanded its reach into all workplaces when it revamped its standard for assessing whether an employer’s workplace rules violated the National Labor Relations Act (“NLRA” or the “Act”). The Board’s August 2, 2023 decision in Stericycle, Inc. overturned prior Board precedent, making it easier to prove that an employer’s work rule violated employees’ rights under Section 7 of the NLRA, which includes the right to participate in union activities and to “engage in other concerted activities for the purpose of collective bargaining or other mutual aid and protection.” When combined with the Board’s 2023 incursions into the realm of noncompetition covenants and severance agreements, the Stericycle decision seems to solidify the Board’s continued relevance, despite the fact the rate of labor union membership remains at historic lows.

The Board’s History of Regulating Employer Policies

It has long been a violation of the NLRA for an employer to maintain a policy or work rule that interferes with, restrains or coerces employees in their exercise of Section 7 rights. For instance, even before Stericycle, the Board had consistently taken the position that a policy prohibiting employees from discussing their own wages with coworkers violated the Act. In Board parlance, such policies are said to “chill” employees’ exercise of their rights because employees are more likely to forgo Section 7-protected activity if they think it might violate a work rule and result in discipline or discharge. This general concept remains unchanged.

What makes the Stericycle decision notable is its revamping of the test by which such rules are evaluated. Since 2017, the Board had taken a categorical approach to evaluating work rules, placing them into one of three buckets: those that were always lawful, those that were sometimes lawful, and those that were never lawful. Sorting was accomplished by weighing (i) the nature and extent of the potential impact on Section 7 rights against (ii) the employer’s legitimate justification in maintaining the rule. In Stericycle, however, the current Board rejected this approach out of hand as far too deferential to employers.

The New, Employee-focused Test

Now, when considering whether a work rule constitutes an unfair labor practice in violation of the Act, the Board will first evaluate whether the General Counsel (analogous to a prosecutor in a criminal proceeding) has established that the challenged rule “has a reasonable tendency to chill employees from exercising their Section 7 rights.” With this established, the rule becomes presumptively unlawful. Then, the employer is given the opportunity  to “rebut the presumption by proving that the rule advances a legitimate and substantial business interest and that the employer is unable to advance that interest with a more narrowly-tailored rule.” (emphasis added)

At the first stage of the analysis, the Board will evaluate the rule from the perspective of the employee. This is because, the Board reasoned, employees are economically dependent on their employers and, as a result, are inclined to interpret an ambiguous rule to prohibit Section 7 activity that they would have otherwise engaged in.  Furthermore, the question is not whether this hypothetical reasonable employee would view the rule as chilling of rights, but rather whether they could view it in such a manner. In other words, a challenged policy will not be saved simply because there exists a reasonable interpretation that would not chill Section 7 rights. As described in Stericycle, the General Counsel’s initial burden to presumptive unlawfulness does not appear onerous.

The employer’s rebuttal standard, by contrast, is significant. Not only must the employer’s reason for maintaining the rule be “legitimate,” but it also must be “substantial.” But perhaps more concerning from the employer's standpoint is the requirement that the employer prove that there is no way it could protect its interest by a more narrow rule. In imposing this burden, the Board explicitly equates the protection of Section 7 rights under the NLRA with a similar approach taken by the courts when evaluating limits on free speech under the First Amendment.

For employers whose policies are deemed to violate the Act, the specific remedy will be a requirement that the employer rescind or more narrowly redraft the policy to comply with the Board’s views. While this penalty may seem slight, there are risks of other consequences for maintaining a rule deemed to be illegal. For instance, employees terminated or disciplined for violating an overbroad rule could be entitled to relief, such as backpay or reinstatement.

What’s Next for Employee Handbooks and Other Work Rules?

At issue in the Stericycle case were employer policies on personal conduct, conflicts of interest and confidentiality of harassment complaints. But with its focus on recasting how rules are to be evaluated, the Board declined to specifically evaluate the challenged rules, leaving this task to an administrative law judge. Employers will have to wait before cases applying the new rule clarify what will and will not be permitted. In the meantime, employers are left with some uncertainty.

Given prior Board precedent and the Stericycle majority’s criticism of certain cases under the now-rejected standard, it is likely that employer policies dealing with social media, workplace video/audio recording, confidentiality, conflicts of interest, nondisparagement, and workplace behavior, among others, may be scrutinized in the coming years.

Employers should take the opportunity to review their employee handbooks and other sources of workplace rules to determine whether any policies or provisions may tend to chill employees’ exercise of their Section 7 rights under the new standard. Those at-risk policies should at least be considered for possible narrowing. Also, while the Board has not opined on the sufficiency of disclaimers, employers should consider including statements in their handbooks that nothing is intended to infringe employees’ rights. The effect of such provisions, if any, will surely be addressed by the Board in future cases.

If you would like assistance in reviewing your workplace policies in light of the Stericycle standard, feel free to reach out to a member of Lewis Rice’s Labor & Employment group.