Handbook Hazards: NLRB Ruling Affects Employee Manuals

On August 2, 2023, the National Labor Relations Board (NLRB) issued its ruling in the case of Stericycle, Inc. This new ruling may have a significant impact on employers who use employee handbooks or policy manuals. Under this new rule, employers should be careful to ensure that their handbooks do not contain provisions that might violate federal law and result in legal liability.

Broader than You Think: An Overview of NLRA Section 7

The National Labor Relations Act of 1935 (NLRA) is a complex federal statute that regulates labor relations in the United States. The NLRA provides for collective bargaining rights, sets a framework for labor unions and employers to enter into collective bargaining agreements, and establishes rules and procedures for union elections as well as labor strikes. However, the NLRA also includes an important provision (Section 7) that can significantly affect employers and employees apart from any formal unionization, collective bargaining agreement, or strike. NLRA Section 7 provides as follows:

Employees shall have 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, and shall also have the right to refrain from any or all of such activities.¹

While Section 7 may appear to apply only to collective bargaining activities such as union membership, handbilling, striking, or picketing, the term “concerted activities” includes a host of other conduct that is not directly related to collective bargaining. Employee activities protected under Section 7 include sharing information about their salaries and benefits, distributing certain types of literature in the workplace, discussing working conditions with colleagues, and asserting their grievances about wages, hours, or working conditions.

Section 8(a)(1) of the NLRA provides that it is unlawful for an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7.” This means that employers may not retaliate against any employee for having engaged in any activity protected by Section 7. It also means that employers cannot implement policies or written agreements that discourage employees from engaging in Section 7 activities. This is known as “chilling” Section 7 activity. For example, the NLRB has ruled that an employer’s “no-gossip” policy in the workplace constituted unlawful interference with employees’ Section 7 rights. Moreover, in a decision from earlier this year that we discussed, the NLRB ruled that non-disparagement and confidentiality provisions in severance agreements constituted unlawful interference. Some NLRB decisions have even struck down employer rules forbidding employees’ use of cameras or recording devices in the workplace. The takeaway here is that interfering with employees’ Section 7 rights need not be intentional in order to land employers in big trouble.

The Pendulum Panel: The National Labor Relations Board

The NLRA is primarily enforced and interpreted by the NLRB, an independent federal agency made up of five board members who are appointed by the President and serve five-year terms. Despite the NLRB’s formal political independence, the composition of the board has historically tended to change with each changing presidential administration. The result has been a series of pendulum swings between an employer/management-friendly disposition and an employee/union-friendly orientation. This produces a body of decisions interpreting and applying the NLRA that vacillates between pro-employer and pro-union standards.

Unlike judicial courts, the NLRB is not bound by the precedent of its past decisions, and it often reverses its own previous rulings after a change in the board’s partisan/ideological composition. The NLRB later reverses those reversals, then overturns rules once again, and so on. On many important labor law issues, the NLRB has shifted back and forth between two or more standards several times over decades, nauseating and confusing employers, employees, unions, and attorneys as they try to follow the moving target of NLRA rules.

Bright-Line Balancing vs. Burden-Shifting: The Stericycle Decision

The NLRB’s recent Stericyle decision is yet another example of the classic NLRB pendulum swing. In 2004, the NLRB issued a ruling called Lutheran Heritage Village-Livonia which declared unlawful any workplace rule or handbook provision that “would reasonably be interpreted” by employees as limiting protected activities was unlawfully chilling of employees’ Section 7 rights. Under the Lutheran Heritage standard, the NLRB frequently ruled against employers who had workplace policies aimed towards promoting civility and productivity in the workplace and discouraging conduct that was characterized as disruptive or insubordinate.

In 2017, the NLRB overturned the Lutheran Heritage standard in a decision called Boeing Co. The Boeing Co. ruling established a set of “categories” for workplace rules:

Category 1—Rules that were always lawful to maintain— i.e., rules that, as a type, did not interfere with Section 7 rights and rules where the adverse impacts on Section 7 rights were outweighed by justifications associated with such rules.

Category 2—Rules that were sometimes lawful to maintain—i.e., rules that “warrant scrutiny in each case.”

Category 3—Rules that were always unlawful to maintain— i.e., rules that, given their impact on protected activity, could never be justified by an employer.

This standard was far more employer-friendly than the Lutheran Heritage standard because it created a predictable and bright-line analysis for determining when a handbook provision or other workplace rule “chilled” employees’ Section 7 rights. If an employer’s rule did not fall clearly within Category 1 or Category 3, Category 2 would require balancing employees’ Section 7 rights against employers’ legitimate workplace interests to determine if the rule was lawful.

The recent Stericycle decision overturns the employer-friendly Boeing Co. interest-balancing standard and replaces it with a burden-shifting framework. Under the new Stericylce standard, a party challenging an employer’s workplace rule under the NLRA has an initial burden of showing that the rule “has a reasonable tendency to chill employees from exercising their Section 7 rights.” If this burden is met, the rule or handbook provision will be presumed unlawful and the burden shifts to the employer to rebut this presumption by showing “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.”

This new burden-shifting framework (which is really just a modified version of the old Lutheran Heritage standard) subjects all NLRA challenges to employee handbook rules to a case-by-case determination. The Stericycle ruling states that in making these individualized determinations, the NLRB will “consider all important aspects of the problem posed by potentially overbroad work rules,” including “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.”

Review, Reconsider, and Revise: Implications for Employers

The aim of the old Boeing Co. standard was to make this complex area of NLRA compliance more predictable for employers by creating clear categories of what was and was not lawful with respect to workplace rules and to account for an employer’s interests in maintaining certain rules that did not fit into either category. The new Stericyle standard throws predictability and employer deference out the window. The ruling articulates an abstract framework and does not provide any meaningful practical guidance or concrete examples of what kinds of workplace rules might be unlawful.

In light of this new unpredictable standard for workplace rules, employers should be serious about ensuring that their employee handbooks, policy manuals, and other workplace rules are drafted in such a way as not to have a “reasonable tendency to chill employees from exercising their Section 7 rights.” Again, the practical tips on what to look for are not clear here. At a basic level, employers will want to scrub language that restricts employees from communicating with each other or with management about wages, hours, or working conditions. But beyond that, the scope of “Section 7 activities” and “interference” is dynamic and rapidly evolving. One practical tip is to implement language in handbooks and policies that disclaims any intention of discouraging or interfering with Section 7 conduct and expressly affirms employees’ rights to engage in concerted activities.

The Stericycle ruling is just the latest in a string of NLRB decisions that demonstrate a much more aggressive posture being taken against employers under the NLRA. These decisions are expanding the scope of NLRA application in new ways and affecting employers, industries, and workplaces who have heretofore been unconcerned about this area of legal risk. In light of the changing landscape of American labor law, employers should consult with knowledgeable legal counsel to review and scrutinize all employee handbooks and workplace policies, reconsider rules and language in light of the new burden-shifting standard, and make any necessary revisions to avoid unnecessary legal risk.

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¹ 29 U.S.C § 157 (emphasis added).

Featured Image by Rebecca Sidebotham.