NLRB’s New (Old?) Position relating to Employee Handbooks: Stericycle, Inc.

NLRB issued a decision in Stericycle Inc., adopting a “new” legal standard to determine whether employer work rules that do not expressly restrict employee Section 7 rights, are nonetheless facially unlawful under Section 8(a)(1) of the National Labor Relations Act (“NLRA”).

In short, the decision overrules the NLRB’s decision in Boeing Co. (2017), and it reinstates a modified version of the Board’s Lutheran-Heritage standard. Under this new standard, an employer rule or policy is “presumptively unlawful” if it tends to chill employees from engaging in protected conduct under Section 7 of the NLRA. If such a finding is made, the rule/policy can still survive, but only if the employer is able to demonstrate that the rule advances a legitimate and substantial business interest that cannot be advanced by a more narrowly tailored rule.

Legal Background: Lutheran Heritage (2004) Standard

In the Lutheran Heritage standard, the Board determined that the relevant inquiry “begins with the issue of whether the rule explicitly restricts activities protected by Section 7.” Section 7 of the NLRA guarantees employees "the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection," as well as the right "to refrain from any or all such activities". If it does not, a violation “is dependent upon a showing of one of the following: (1) employees would reasonably construe the language to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of Section 7 rights.”

Boeing Standard (2017)

In 2017, the Board overruled the Lutheran-Heritage decision. The Boeing majority held that, when deciding the lawfulness of maintaining a “facially neutral” work rule, the Board “will evaluate two things-(1) the nature and extent of the potential impact on NLRA rights, and (2) legitimate justifications associated with the rule”-and weigh them against each other.

The majority also created a categorical classification system for evaluating rules under its standard:

• Category 1. Rules that are always lawful to maintain because, under any reasonable interpretation, the rules would not interfere with NLRA rights or because the potential adverse impact on protected rights would be outweighed by justifications for the rules.
• Category 2. Rules that warrant individualized scrutiny in each case because the impact on protected rights may outweigh any legitimate justifications.
• Category 3. Rules that are always unlawful to maintain because any legitimate justification for the rules would be outweighed by the chilling effect on NLRA rights.

The Boeing standard was understood to be much more employer-friendly than the previous Lutheran-Heritage rule.

Stericycle (2023) Standard

On August 2, 2023, the Board decided to overrule Boeing and advanced a modified version of the framework set forth in Lutheran Heritage. In Stericycle, the Board reasoned that although Lutheran Heritage had established the Board’s proper interpretive focus, the perspective of a reasonable employee subject to the rule, the Board had not sufficiently articulated how employers’ interests fit into the analysis. In contrast, the Board determined that Boeing had appropriately recognized that employer interests should factor into the Board’s analysis but concluded Boeing had articulated interpretive principles that failed to reflect the coercive potential of work rules.

Under the new standard adopted in Stericycle, the General Counsel must prove that an employee “could reasonably interpret the [work] rule [at issue] to have a coercive meaning,” leading to a chilling effect on protected activity. If the General Counsel satisfies this burden of proof, then the rule is presumptively unlawful. Importantly, whether a work rule could be reasonably interpreted in this manner is taken from the perspective of a lay employee who seeks to engage in Section 7-protected activity, rather than from a purely objective standard.

The employer may then rebut the 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. If the employer can meet this burden, the rule will be found lawful.

As a result of the Stericycle decision, the legal risks to employers resulting from overbroad work rules/handbook policies have again increased. 

Bottom Line: What Employers Should Do Now

In response to the Stericycle decision, employers may want to consider closely scrutinizing their existing written policies, particularly policies that touch on confidentiality, workplace communications, social media policies, and disciplinary policies/work rules. Employers should consider erring on the side of more narrowly construed policies rather than broad or intentionally ambiguous policies.

Additionally, employers may also want to investigate adopting a policy that details employees’ rights under Section 7 of the NLRB, and specifically provides that no rule adopted by the employer should be interpreted as restricting those rights. This kind of policy may strengthen an employer’s position in the event an employee or the NLRB ever asserts that one or more employer policies infringes on one or more employee’s Section 7 rights. The Board’s decision in Stericycle did not address these general and preventative policies, but the Board’s General Counsel has previously taken the position that such policies could create a presumption that an employer’s rules are lawful.

Lastly, employers should monitor any further Board/court activity on this issue. It is unclear whether the Board’s decision will be appealed. In the meantime, however, the decision is enforceable, and employers should ensure their work rules and policies are compliant.

If you have any questions or would like to discuss appropriate revisions to any of your employment policies, please contact the author or any of the attorneys in DeWitt’s Labor & Employment practice group.