Overview
The National Labor Relations Board (NLRB) recently issued a decision that undercuts union and nonunion employers’ ability to enforce longstanding work rules and policies. In general, this decision will lead to increased unfair labor practice charges, investigations and litigation.
On an individual business level, there are now two options:
- Bet on the potential reversal of this NLRB decision in the circuit courts in the next one to two years; or
- Identify core policies and rules for immediate review and revision to eliminate technical ambiguity that will undermine enforceability and increase NLRB investigation and litigation costs.
On August 2, 2023, in Stericycle, Inc., the NLRB held that work rules (for both unionized and nonunionized employers) are presumptively unlawful if an employee could interpret them to restrict rights under the National Labor Relations Act (NLRA). This presumption applies even if a rule does not actually restrict any rights, or if no other employee in the workplace would interpret the rule that way. The new standard applies to old, new and future rules—there is no safe harbor.
In Depth
ANALYSIS AND IMPACTS
Stericycle sweeps broadly, as a comparison of the new and old tests for evaluating policy lawfulness shows:
Commonsense, Former Standard: Workplace rules are lawful unless reasonable employees would interpret those rules to restrict rights protected by the NLRA.
Stericycle addresses “facially neutral” rules that do not expressly restrict employee rights under the NLRA. Rules prohibiting the unauthorized disclosure of confidential business information to outside entities or promoting a respectful work environment are classic examples.
These rules serve important company interests, such as fostering compliance and providing a safe and supportive working environment. And, until now, the NLRB placed traditional work rules like these into one of three categories:
- Rules that are presumptively lawful (e.g., rules prohibiting disclosure of a company’s confidential, proprietary or trade secret information);
- Rules that require a case-by-case review (e.g., social media policies); and
- Rules that are unlawful (e.g., rules prohibiting employees from discussing wages).
The NLRB assigned rules to their appropriate category by applying a clear and straightforward test: Would a reasonable employee (i.e., one who understands why work rules exist and what they hope to achieve) believe the rule in question restricts his or her rights under the NLRA? For example, would an employee interpret a rule prohibiting disclosure of the company’s confidential and trade secret information to also prohibit discussions of working conditions with their coworkers? The answer was presumptively “no,” and the rule was presumptively lawful.
The New Standard: Workplace rules are presumptively unlawful where employees could interpret those rules to restrict rights protected by the NLRA.
Now, a facially neutral work rule or policy is presumptively unlawful if any employee could interpret the rule/policy to restrict rights under the NLRA. It does not matter if the rule does so, or if the same (or every other) employee could just as reasonably interpret the same rule or policy to have no bearing on their rights.
Stericycle redefines the “reasonable employee.” This hypothetical employee no longer understands the rationale for workplace rules and is incapable of viewing a particular rule within the larger context of his or her employment. Instead, the NLRB’s new paradigm is “readily inclined to interpret [the rule] more broadly to restrict or prohibit” employee rights under the NLRA.
This new outlook predetermines the outcome of the NLRB’s new analysis: An employee predisposed to believe that every work rule restricts his or her rights under the NLRA could believe a rule prohibiting disclosure of a company’s confidential and trade secret information also prohibits discussions of working conditions with their coworkers. After all, working conditions are not public information and could be confidential, even if the rule at issue clearly focuses on the disclosure of sales information.
Employers may be asking themselves: What if no employee so testifies? Or what if employees testify en masse under oath that this wasn’t their reading or the reading of their coworkers? The answer to these questions is that it doesn’t matter. Stericycle is not evidence-dependent; in each case, its standard merely tests the imagination of the NLRB and its counsel to think of any reason to strike down a rule.
The Stericycle standard is designed to invalidate most work rules as presumptively unlawful. While the NLRB provides employers an “affirmative defense” to rebut the presumption, that will require proving the challenged rule (1) advances legitimate business interests and (2) cannot be achieved by a more narrowly tailored rule. This will prove a tall, if not impossible, task.
WHAT’S NEXT?
Employers must still regulate employee conduct in the workplace but now will need to be selective in announcing rules and more narrowly focused when drafting them. Some rules (e.g., attendance or safety) will be easier. Others will require Herculean efforts and will likely regulate less tomorrow than yesterday.
As a starting point, consider the handbook rules in the crosshairs in Stericycle:
- Retaliation: “All parties involved in the investigation [of a harassment complaint] will keep complaints and the terms of their resolution confidential to the fullest extent practicable.”
- Electronic Communication Policy: “A substantial portion of our business is transacted by telephone and over the wide area network. Therefore, in order to maintain the efficiency of these systems non-business usage must be restricted. Phone and data lines must be kept open for business purposes. Accordingly, personal telephone calls and e-mails should be infrequent and brief, and limited to urgent family matters.”
- Use of Personal Electronics: “The use of personal cell phones or other personal electronic devices such as MP3 players is prohibited in waste processing, warehouse, loading and unloading areas during operating hours and any areas subject to vehicle movement at any time…Personal mobile phones and all other personal mobile electronic devices are to be kept in team members’ lockers. Personal phone calls and use of personal electronic devices shall be restricted to meal and break periods. Violation of this policy may result in disciplinary action up to and including termination.”
- Personal Conduct: “In order to protect everyone’s rights and safety, it is the Company’s policy to implement certain rules and regulations regarding your behavior as a team member. Conduct that maliciously harms or intends to harm the business reputation of Stericycle will not be tolerated. You are expected to conduct yourself and behave in a manner conducive to efficient operations. Failure to conduct yourself in an appropriate manner can lead to corrective action up to and including termination. The following are some examples of infractions which could be grounds for corrective action up to and including termination, however[,] this list is not all-inclusive…Engaging in behavior that is damaging to Stericycle’s reputation.”
- Conflict of Interest: “Stericycle will not retain a team member who directly or indirectly engages in the following: An activity that…adversely reflects upon the integrity of the Company or its management.”
Each rule is at risk under Stericycle and will remain so until the new standard is challenged on appeal (which seems probable). Circuit courts previously voiced concerns over similar standards, and it is possible the new test will not withstand scrutiny.
In the interim, Stericycle will open the floodgates to legal challenges to employee handbooks and other employee rules and policies in both union and nonunion settings, leaving employers to decide on policy revisions, settlement strategy or litigation. For example, routine and commonsense work rules prohibiting “loud, abusive or foul language” or “false, vicious, profane or malicious statements about an employer or its employees” will be challenged as unlawful by one-off employees or unions seeking to inspire organizing campaigns. These challenges will often be successful. But giving up or turning a blind eye to abusive conduct can create a hostile work environment that negatively impacts employee morale and retention. Employers facing this dilemma now possess two unpalatable options: regulate employee misconduct at the risk of litigation or permit a toxic work environment.
Still, employers can and should take steps to mitigate these risks and fend off years of uncertainty by identifying and modifying core work rules and policies. Potential action items include:
- Limiting work rules to only regulate truly important issues.
- Narrowing the scope of work rules and, if practicable, providing examples of the specific conduct prohibited versus what is permitted (e.g., clarifying that a company’s policy prohibiting “loud, abusive or foul language” in the workplace does not prohibit any employee from raising concerns about work conditions to their supervisor or designated HR representative).
- This modification should mitigate (if not eliminate) the risk that employees will misinterpret neutral rules to restrict their rights under the NLRA.
- Explaining the scope and intent of work rules to employees, whether in the text of the rule, via employee training or both.
- This is particularly important for rules prohibiting the unauthorized disclosure of confidential business information to outside entities. Identifying the types of confidential, proprietary and trade secret information at issue, and why they must be safeguarded, will go a long way towards insulating these rules from challenge.
- Consider adding disclaimers to certain rules (e.g., “This rule neither prohibits nor limits discussion of working conditions with coworkers or any other right protected by the NLRA.”).
