Employers – The NLRB Has Just Made Many Common Work Rules Unlawful

By Chad M. Horton - Shawe Rosental LLP

August 3, 2023

In an unsurprising decision applicable to both unionized and non-union employers, the National Labor Relations Board changed its standard for assessing whether seemingly neutral work rules violate the National Labor Relations Act (NLRA). The Board’s decision in Stericycle, Inc. applies to challenges to an employer’s maintenance of work rules that do not expressly apply to employees’ protected activity. (Note: This decision does not alter Board law concerning the analysis of rules that explicitly restrict activities protected by Section 7 of the NLRA, or rules enacted in response to activities protected by the NLRA, such as union organizing.)

The Board overturned the Trump-era holdings in Boeing Co. (2017) and LA Specialty Produce Co. (2019), which designated “categories” of rules, including a category of rules that are always lawful to maintain. In several cases following Boeing, the Trump Board held that such “always lawful” rules included work rules requiring employee civility, prohibiting outside employment, and mandating employee confidentiality during employer investigations. Now, the Board will analyze facially neutral work rules on a case-by-case basis using a new balancing test announced in this decision.

History of The NLRB’s Standard for Assessing Facially Neutral Work Rules

The Board’s 2004 decision in Lutheran Heritage Village-Livonia held that facially neutral work rules violated the NLRA if employees could “reasonably construe” the rules to prohibit employee exercises of rights protected by the NLRA. This standard was later applied to hold many otherwise neutral rules unlawful, including rules prohibiting disruptive behavior in the workplace and the use of cameras in production areas, among others.

In 2017, a Republican-majority Board overturned that standard in Boeing. Following Boeing, the Board evaluated facially neutral work rules by examining (1) the nature and extent of the potential impact on NLRA rights, and (2) the legitimate justifications associated with the rule. In connection with that test, the Board established three “categories” of work rules representing a classification of results from the Board’s application of its Boeing test. In 2019, the Board issued a decision in LA Specialty Produce Co. that attempted to further clarify the Boeing test. That case created two sub-categories of Category 1 rules that were lawful to maintain. LA Specialty Produce created a sub-category of rules that would always be lawful to maintain – in the context of that case, a media contact rule and a confidentiality rule prohibiting disclosure of confidential and proprietary information.

Stericyle Standard

In a 3-1 decision, the Board has created a new standard for assessing facially neutral work rules that, according to the majority, “builds on and revises the Lutheran Heritage standard.” The Board articulated that a burden-shifting framework would be used to analyze neutral rules. First, the General Counsel (GC) must establish that an employee could reasonably interpret the rule to have a coercive meaning “even if a contrary, non-coercive interpretation is reasonable. If the GC carries her burden, the rule will be “presumptively unlawful.” The employer could then rebut that presumption by proving both (1) the rule advances a legitimate and substantial business interest, and (2) the employer cannot advance that interest with a more narrowly-tailored rule. Thus, if the interest could even theoretically be advanced by an even nominally less restrictive rule, the employer will be unable to meet its burden and the rule will be held unlawful.

The Board advanced several rationales for striking down Boeing and LA Specialty Produce. The majority opined that those decisions failed to account for the economic dependency of employees on their employers. To maintain their employment, the Board said, employees will construe an ambiguous rule to prohibit activities protected by the NLRA, and the work rule therefore interferes with and restrains such activity. Additionally, the majority posited that Boeing placed too much weight on employer interests by not requiring the employer drafting the rule to narrowly-tailor the rule to only promote its legitimate and substantial interest.

Further, the Board rejected Boeing’s “categorical” approach to certain work rules. Moving forward, the Board will use a case-by-case analysis and assess the challenged rules, their language, and the employer interests actually invoked to justify the rules. Put simply, the Board will no longer categorize certain work rules as always lawful to maintain, as the Trump Board did with several work rules.

Applying its new standard, the Board affirmed an administrative law judge’s decision that the employer’s rules governing conflicts of interest, personal conduct, and confidentiality of harassment complaints violated Section 8(a)(1) of the Act. Notably, the Board remanded the employer’s investigation confidentiality rule to the ALJ to apply the Stericycle standard to that rule. Such action sets the stage for the Biden Board to formally overrule Apogee Retail, another Trump-era decision that held that employers may require employee confidentiality for the duration of an investigation.

Takeaways and What’s Next

This holding certainly eliminates employer certainty that delineated categories of work rules would always be held lawful. Employers must now assess its facially neutral work rules to determine if the rule – as analyzed by an ardently pro-employee and pro-union GC and Board – could reasonably be interpreted as interfering with or restricting employees’ exercise of activities protected by the NLRA. An employer would be justified in assuming that most work rules will be so interpreted by this GC and the Board. Employers must ask themselves if they can first articulate the legitimate and substantial interest the rule advances. And even if the employer can do so, it must then make a sober assessment as to whether the rule could be “more narrowly tailored” to advance that same interest.

This decision is likely a harbinger for coming Board decisions wielding this standard to find many of the same work rules held lawful under Boeing to now be unlawful. Civility rules, no-recording rules, rules prohibiting outside employment (because it can be used against union “salts” trying to obtain employment with employers and then organize those employers), investigative confidentiality rules, and media contact rules, among others, are likely on the Board’s chopping block. We will keep you updated concerning these developments.

www.shawe.com