National Labor Relations Board overrules 2017 Boeing decision and sets forth new standard for handbook policies

Union and non-union employers could face an uphill climb defending well-intentioned workplace rules under the new framework issued by the National Labor Relations Board ("NLRB") in its long-awaited decision in Stericycle, Inc. The Board places heightened emphasis on protecting worker rights under Section 7 of the National Labor Relations Act ("NLRA"), setting a new standard for determining whether an employer's workplace policies violate federal law.

The Stericycle decision overruled the NLRB's prior Trump-era 2017 decision in Boeing Co. that afforded employers increased flexibility in maintaining workplace policies and rules. With an eye on safeguarding employees, the Board's new decision in Stericycle returns to, "builds on and revises" the unpredictable prior standard set forth in Lutheran Heritage. Under Stericycle, the Board will now consider whether an employer's workplace rule has a "reasonable tendency to chill" employee rights and whether a more "narrowly tailored" rule could equally serve the employer's interests.

Stericycle Reverses Boeing Co. Standard

Prior to the Stericycle decision, the NLRB's Boeing Co. decision held that, when deciding the lawfulness of maintaining a "facially neutral" work rule, the Board will evaluate only two things: (1) the nature and extent of the potential impact on NLRA rights, and (2) legitimate justifications associated with the rule. The Boeing Co. decision and subsequent cases also placed work rules in one of three categories based on the subject of the rule – certain subjects were always classified as lawful (e.g., civility rules), other subjects were always classified as unlawful (e.g., rules prohibiting discussion of wages), and other subjects were sometimes lawful and required scrutiny in each case. The prior Boeing Co. standard had been viewed by many as striking a balance between an employer's business reasoning for the workplace policy and the impact the policy would have on workers' NLRA rights.

In defending the departure from the Boeing Co. standard, NLRB Chairman Lauren McFerran stated: "Boeing gave too little consideration to the chilling effect that work rules can have on workers' Section 7 rights." (NLRB Press Release, August 2, 2023). The Board stressed that its new standard is a course correction from Boeing Co., which led to overbroad work rules and employee rights being treated as peripheral.

Under the new Stericycle standard, the NLRB found that employer handbook policies violate the NLRA if the policies have a "reasonable tendency" to discourage employees from engaging in protected activity, including discussing terms and conditions of employment with colleagues. An employer's intent is "immaterial" according to the NLRB with the analysis focused on whether a worker could "reasonably interpret the rule to have a coercive meaning."

The second part of the new standard provides an opportunity for an employer to defend its rule by demonstrating it "advances a legitimate and substantial business interest" and that the interest could not be met with "a more narrowly tailored rule."

The Board explained it will "interpret the [new standard] 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." 372 NLRB No. 113, p.2. And "if an employee could reasonably interpret the rule to have a coercive meaning, the General Counsel will carry her burden" of establishing a presumption that the rule is unlawful "even if a contrary, noncoercive interpretation of the rule is also reasonable." Id. However, employers "may rebut that presumption by proving that the rule advances a legitimate and substantial business interest and that the employer is unable to advance that interest with a more narrowly tailored rule." Id.

The standard can be articulated in two parts:

1. A workplace rule is presumptively unlawful if an employee could reasonably interpret the rule to restrict or prohibit protected activity.

2. An employer can rebut that presumption of unlawfulness by proving that the rule advances a legitimate and substantial business interest and that the employer is unable to advance that interest with a more narrowly tailored rule.

The Board also found the new standard applies retroactively to all pending and future cases and remanded to the administrative law judge for "further appropriate action" in light of the newly adopted standard.

In sum, the Stericycle decision provides employers with a new framework in evaluating workplace policies and rules. Now, the Board will interpret the rule from the perspective of the reasonable employee and if the rule is found to be ambiguous, it will be interpreted in favor of the employee.

Next Steps for Employers

Stericycle, Inc. is representative of the current Board's pendulum swing toward broadly protecting employee rights. It is anticipated that companies will see more scrutiny given to their handbook policies and workplace rules in light of the new standard. Now is an opportunity for employers – with union or non-union workforces – to revisit their employee handbooks, policies and rules to ensure they are unambiguous and predictable with respect to interpreting interference with employee rights under Section 7 of the NLRA. We encourage employers to consult with legal counsel to ensure compliance with the new guidance.

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Join us August 17 for a discussion of the new standards set for employee handbook policies and workplace practices announced in the NLRB’s Stericycle decision. Understand the implications and receive practical guidance on updating employee handbooks (again) and revising your workplace practices to minimize risk.

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