On Aug. 2, the National Labor Relations Board (NLRB) set a new standard to evaluate facially neutral work rules in union and nonunionized workplaces when it issued a much-anticipated decision in Stericycle, Inc., 372 NLRB No. 113 (2023). The new standard skews heavily in favor of employees and unions and overrules the more employer-friendly precedent in place since 2017. Unfortunately, however, Stericycle provides little, if any, guidance to employers about how to craft rules that will satisfy the new standard.

The New Framework for Evaluating Work Rules

The Stericycle majority made clear that its primary goal is to protect employees’ statutory rights under Section 7 of the National Labor Relations Act (“the Act”) to form and join unions and to concertedly better their working conditions. In Stericycle, the Board held that a work rule that has the tendency to “chill” employees in the exercise of Section 7 rights is presumptively unlawful. In determining whether a work rule has the tendency to chill employees from exercising Section 7 rights, the Board will interpret the rule from the perspective of a reasonable employee “who contemplates engaging in Section 7 activity” but who fears discipline or discharge for violating their employer’s ambiguous work rule because the employee is economically dependent upon their employer. The Board further explained that a work rule is presumptively unlawful even if it may also reasonably be interpreted not to restrict Section 7 activity and even if the employer did not intend for the rule to restrict Section 7 rights.

An employer may rebut the presumption that a rule is unlawful 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. If the employer meets this burden, then the work rule will be lawful to maintain. The majority acknowledged that its standard may not “provide complete certainty and predictability in this area of law.”

The Stericycle majority rejected the approach to work rules in Boeing Co., 365 NLRB No. 154 (2017), LA Specialty Produce Co., 368 NLRB No. 93 (2019) and related cases, which were issued by a then-Republican controlled Board. Board Member Marvin E. Kaplan, who was in the Boeing majority, dissented from the Stericycle decision.

The Boeing Standard

Prior to the Stericycle decision, under Boeing, work rules were placed into three categories:

• Category 1 rules were generally lawful to maintain, either because a reasonable interpretation of the rule did not prohibit or interfere with the exercise of Section 7 rights, or because the potential adverse impact on protected rights is outweighed by the business justifications associated with the rule. Category 1 rules included civility rules, rules against using company logos, no-photography and no-recording rules and rules prohibiting disruptive conduct and insubordination, among others.
• Category 2 rules warranted individualized scrutiny and examination of context. For Category 2 rules, the Board would evaluate whether the employer’s business interests in having the rule outweighed the impact on Section 7 rights. Category 2 rules included confidentiality rules broadly encompassing “employer business” or “employee information” and rules prohibiting non-disparagement of the employer, among others.
• Category 3 rules were generally unlawful to maintain because the impact on Section 7 rights would not be outweighed by an employer’s justification for the rule. Examples of Category 3 rules included rules prohibiting employees from discussing their wages and rules prohibiting employees from disclosing information about their working conditions to the media.

The Stericycle majority called Boeing’s categorical approach arbitrary and said the new standard will instead allow for a case-by-case approach that considers the specific wording of a challenged rule, the industry and workplace context in which it is maintained, the employer interests it may advance, and the statutory rights it may infringe.

Boeing overruled Lutheran Heritage Village-Livonia, 343 NLRB 646, the standard governing work rules since 2004. Under Lutheran Heritage, a facially neutral work rule was unlawful if an employee would “reasonably construe” the language to prohibit Section 7 activity. While Lutheran Heritage acknowledged that work rules serve legitimate business purposes, it did not explicitly address how an employer’s interests factor into the analysis.

The Stericycle decision claims to modify and build on Lutheran Heritage by restating that the proper interpretive focus is the perspective of a reasonable employee, while also explaining how an employer’s business interests factor in the analysis (i.e., employers have the opportunity to rebut the presumption that a rule is unlawful by proving it advances a legitimate and substantial business interest that cannot be achieved by a more narrowly tailored rule).

Employer Takeaways

Employers may wish to review their employee handbooks, manuals and other documents containing work rules or policies to ensure compliance with the newly announced standard. Policies that may be under scrutiny include rules governing standards of conduct, social media, contact with press and the media and confidentiality rules. We expect to receive more guidance in the coming weeks – both from Board law applying Stericycle and from the NLRB’s General Counsel. Miles & Stockbridge’s labor lawyers are following this issue closely and will provide updates.

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