Employer Handbooks and Policies Will Face More Scrutiny Under Stericycle, Inc. - NLRB Reverses a Prior Reversal

On August 2, 2023, the National Labor Relations Board (“NLRB” or “Board”) announced a long-anticipated Decision that will affect how employers craft, apply and enforce workplace policies in almost all workplaces, regardless of whether employees are represented by a union. As we anticipated several years ago, the current Board, with a majority of members nominated by President Biden, has now rejected the agency’s 2017 decision in The Boeing Company, in which it adopted a balancing test to evaluate facially neutral employer rules and handbook provisions by examining the nature and extent of their potential impact on employee rights under the National Labor Relations Act (“NLRA” or the “Act”) against legitimate justification(s) for the policies.

The majority opinion in Stericycle Inc. substantively revives the NLRB’s stance on workplace rules as established in the 2004 Lutheran Heritage decision.Under this new framework, any employer’s rule, policy, or handbook provision that  has a “reasonable tendency to chill employees from exercising their Section 7 rights” may be deemed to constitute an unfair labor practice and to be unlawful in violation of the NLRA.

What’s Old is New (and “Improved”)

Under this Stericycle standard -- a redux of the Lutheran Heritage standard -- the NLRB General Counsel (GC) will bear the burden of establishing that an employer rule or policy may tend to inhibit employees from exercising their protected Section 7 rights. Section 7 grants employees the right to engage in a broad range of activities for their mutual aid and protection concerning their terms and conditions of employment.

The “Big Update” here is the perspective from which the Board will assess an employer rule. Under Stericycle, the Board will interpret rules “from the perspective of an employee who is subject to the rule and economically dependent on the employer, and who also contemplates engaging in protected concerted activity.” This position is grounded in a view that employees are in a “vulnerable position” relative to their employers and that workplace rules must be “narrowly tailored” to advance “a legitimate and substantial business interest.”

The GC will satisfy her burden — and demonstrate that such rule is presumptively unlawful — whenever she concludes such an employee could “reasonably interpret” a rule to be coercive such that Section 7 activity is, or could be, restricted, even if the rule could also reasonably be interpreted differently, and even if the employer did not intend for its rule to restrict any employee rights.

Defending Workplace Rules

Under this new Stericycle standard, once the GC establishes in an unfair labor practice hearing that an employer’s rule has a “tendency” to suppress protected activity, the employer can rebut the presumption that the rule is unlawful by proving that it advances legitimate and substantial business interests that cannot be achieved with a more narrowly tailored rule. This, the Board asserts, is a critical part of working out the “proper adjustment between employee rights and employer interests.” The decision is an outright rejection of the Boeing Board’s position, which, the current Board contends, found “overly broad” employer rules “perfectly permissible.” The Board expressly calls on employers to craft narrowly tailored work rules and policies, assuring that the “new standard gives employers the necessary leeway to maintain rules of their own choosing to advance legitimate and substantial business interests,” so long as those rules are specific and “significantly minimize, if not altogether eliminate, their coercive potential.”

Retroactive Applicability and Immediate Action Steps

The Decision expressly provides that it applies retroactively, arguing that, for one thing, Boeing and its subsequent clarifications are only a few years old and thus not well-established, and that the “new” standard is a better means of advancing the NLRA’s purpose (not to mention the NLRB’s agenda). Thus, any pending cases in which an employer policy is deemed facially unlawful will result in a remedy requiring rescission of the rule, which employers may substitute with something more narrowly tailored, if possible.

Employers will need to review their handbooks and workplace policies and consider rules, not just from a “reasonable” person standard, but from the “the perspective of an employee who is subject to the rule and economically dependent on the employer, and who also contemplates engaging in protected concerted activity.” Moreover, as we’ve previously explained, the Board and GC have taken an expansive view of who is covered by the NLRA, ostensibly including almost all private sector non-supervisory workers in the country, whether or not employees are organized or represented by a union. Thus, nearly all U.S. employers, including those not (yet) involved with unions, should be considering their workplace policies and whether they could be construed as “chilling” and thus presumptively unlawful.