Tales from the NLRB: Work Rules May Be Presumptively Unlawful

In a case of déjà vu all over again, on August 2, 2023, the National Labor Relations Board (Board) returned to the Obama-era ruling that facially neutral work rules may be per se violative of Section 7 of the National Labor Relations Act (NLRA). However, the Board went one step further and created a new proof structure for employers to meet when defending facially neutral work rules. An employer is now required to show that its facially neutral work rules “advance a legitimate and substantial business interest” and are narrowly tailored to achieve the employer’s end. A failure to meet these criteria will result in the employer being liable for violating the NLRA. Under the new framework, the first inquiry the Board will make is whether the “challenged rule has a reasonable tendency to chill employees from exercising their Section 7 rights … from the perspective of an employee who is subject to the rule and economically dependent on the employer.”

Under Section 7 of the NLRA, employees “have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively …, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” The Board has long held that the “mere maintenance of a work rule may unlawfully interfere with, restrain, or coerce employees in the exercise of their Section 7 rights.” The Board in its latest decision has noted that “[b]ecause overbroad and ambiguous work rules may have a coercive effect on employees,” it has the power to proactively go after unlawful rules. However, the new standard changes the examination of facially neutral work rules from one that balanced the employer and employee interests to one where the rule may be presumptively unlawful unless the employer can successfully defend it.

How We Got Here

In the Stericycle case, the Board was faced with an employer, who among other things, “unilaterally impos[ed] a team member handbook that changed numerous terms and conditions of employment.” The General Counsel challenged several of the rules in that handbook, including an investigative-confidentiality rule, a civility rule, a conflict-of-interest rule, and a camera and video use policy. The Board invited briefing from the parties and public concerning whether it should modify its work rules standard and overrule several prior decisions on this issue, including its decisions in Boeing Co., LA Specialty Produce Co., and their progeny. After over a year and a half since seeking additional briefing, the majority of the Board, consisting of three Democratic appointees, determined a new standard that rejected Boeing Co., LA Specialty Produce Co., and their progeny.

The New Standard

The new standard “requires the [NLRB] General Counsel to prove that a challenged rule has a reasonable tendency to chill employees from exercising their Section 7 rights.” The Board will then examine the challenged 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,” regardless of the employer’s intent. The Board notes that “[t]his principle is consistent with the Board’s long-established practice of construing any ambiguity in a work rule against the employer as the drafter of the rule.” If the challenged rule can be reasonably interpreted “to have a coercive meaning,” then it is presumptively unlawful. This presumption will occur “even if the rule could also reasonably be interpreted not to restrict Section 7 rights and even if the employer did not intend for its rule to restrict Section 7 rights.”

The employer then has the opportunity to make an affirmative defense that the rule “advances a legitimate and substantial business interest” and cannot be more narrowly tailored than it already is. This analysis will apply case-by-case, with no work rules being considered presumptively lawful. The Board will examine the rules in a fact intensive analysis that considers “the specific wording of the rule, the specific industry and workplace context in which it is maintained, the specific employer interests it may advance, and the specific statutory rights it may infringe.”

Republican Member Marvin Kaplan, who dissented from the Board’s decision, describes the new standard as giving “effectively dispositive weight to the ‘employee rights’ side of the balance” and examining rules from the point of view of “‘eggshell skull’ plaintiff[s]” Further, Kaplan states the Democratic-appointed majority’s decision means that “employers’ only real hope is to avoid [a] finding [of presumptive unlawfulness] in the first place.”

The Path Forward

All employees, regardless of whether they are unionized, have Section 7 rights, and, under the new Stericycle standard, employers can be liable for ULPs from their work rules if they could chill a reasonable employee from engaging in Section 7 activity. The decision indicates several types of rules that are likely to be increasingly scrutinized going forward, including civility rules, conflict-of-interest rules, no camera rules, no recording rules, and investigative-confidentiality rules, among others. As the Board states, employers “simply need to narrowly tailor [their] rules to significantly minimize, if not altogether eliminate, their coercive potential. If employers do so, their rules will be lawful to maintain.” Employers should be mindful of what language is used in their employee handbooks and in any other workplace rules they maintain.

Employers are encouraged to consult with labor and employment attorneys to ensure their employee handbooks and work rules are narrowly tailored and comply with Board decisions. Stay tuned for more legal developments from the Biden-era Board.