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09.11.23   |   Insights

NLRB Increases Scrutiny of Employer Work Rules

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On August 2, 2023, the National Labor Relations Board (“NLRB” or “the Board”) issued a decision in Stericycle, Inc. in which the Board adopted a new legal standard to use when deciding whether an employer’s work rule unlawfully restricts protected employee activity. Work rules can vary in substance and application, but some common examples are rules that address personal conduct, conflicts of interest, and confidentiality of harassment complaints. This new legal standard is more favorable to employees and seems to indicate that an employer’s work rule may be deemed as an unfair labor practice if the work rule has “reasonable tendency to chill employees from exercising their Section 7 rights.” Under Section 7 of the National Labor Relations Act (“Act”), employees generally have the right to join together to advance their interests as employees.

The NLRB Decision Overturns Precedent

This decision overrules existing precedent established by the Board’s 2017 The Boeing Company decision (“Boeing”), and essentially resorts back to the standard set forth in the Board’s 2004 Lutheran Heritage Village-Livonia (“Lutheran Heritage”) decision, with some revisions and additions made.

The Board states that the primary problem with the Boeing standard is that it allows employers to adopt overbroad work rules. Boeing established a balancing test between employee rights and employer justifications for a workplace rule. Rules were assessed from the perspective of a reasonable employee in identifying if the rule would reasonably construe restriction upon the employee, in violation of employee rights under Section 7 of the Act. Further, Boeing adopted a categorical approach as certain types of rules were grouped as always lawful, however, this categorial approach has now been abandoned by Stericycle.

The New Standard

Stericycle results in more enabling language for employees as it builds upon the Lutheran Heritage standard, which limited the discretion and authority that employers had in establishing work rules. The new standard set forth in Stericycle requires the General Counsel of the Board to prove that a challenged rule has a “reasonable tendency to chill employees from exercising their Section 7 rights.”

The Board will interpret the rule from the perspective of a reasonable employee considering whether to exercise their Section 7 rights, keeping in mind an employee’s economic dependence on an employer. This new standard more acutelyaccounts for an employee’s vulnerable position in comparison to their employer. Likening back to Lutheran Heritage’s language, an employer’s rule is presumed unlawful if a reasonable employee could interpret the rule to have a coercive meaning, as the rule would then have a reasonable tendency to deter the employees from exercising their rights.

Employers May Rebut the Presumption of a Rule’s Unlawful Nature

If an employer can show that a work rule advances a legitimate and substantial business interest, and it is unable to be achieved with a more narrowly tailored rule, then the employer will successfully rebut the presumption of unlawfulness. As a result, employers maintain the ability to enforce work rules so long as they comply with the increasing requirement for specificity and minimization of coercive ability.

Next Steps

Employers should review workplace rules under the new language and perspective, keeping in mind that there are no longer any categorical safe harbors. This decision is likely to bring an uptick in complaints against employers as employees test out the court’s limits. Any interpretation of a rule’s restriction of an employee’s Section 7 rights should be highly scrutinized by an employer. Future drafting should be careful to ensure that the rule is the most narrowly tailored version available to advance their interests.

Further, it is notable that Stericycle applies retroactively to cover the bases for including the Board’s purpose. Remedies for currently pending cases will implement the Stericycle standard portraying a more expansive light than previously applied.

Employers with questions related to the application of Stericycle to their workplace should consult with their Critchfield attorney.

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