On Aug. 2, the National Labor Relations Board (NLRB or the “Board”) issued its much-awaited decision on handbooks and work rules in Stericycle, 372 NLRB No. 113 (2023).  The new and very revised standard will make it more difficult for employers of both non-union and unionized workforces to defend against allegations that the employer’s policies illegally restrict employees in the exercise of their rights under the National Labor Relations Act (NLRA or the “Act”).

Background

Before Stericycle, handbooks and work rules were governed by two decisions issued by the Board in 2017 and 2019, The Boeing Co., 365 NLRB No. 154 (2017) and LA Specialty Produce, 368 NLRB No. 93 (2019). Those decisions set a relatively lenient standard for the permissibility of handbooks and work rules. When evaluating work rules and policies under the two decisions, the Board would consider: (1) the nature and extent of the potential impact of the policy on rights under the Act; and (2) legitimate justifications of the employer.

This analysis was to be conducted from the perspective of an objectively reasonable employee who would not “view every employer policy through the prism of the NLRA.”  The Board also noted that a work rule would not be found illegal for the sole reason that it “could” be interpreted to infer with Section 7 rights.  Rather, the Board required proof that a reasonable employee “would” interpret the rule as interfering with the rights of that employee.

Boeing and LA Specialty Produce categorized employer policies into three categories. The first category included work rules that, when reasonably interpreted, would not violate the Act. The second category included rules that must be scrutinized on an individual, case-by-case basis. The third category included rules that would be unlawful under the NLRA.

The New Rule and the End of the Boeing and LA Specialty Produce Standard

On Jan. 6, 2022, the Board (as reconstituted under President Biden) signaled trouble for Boeing and LA Specialty Produce by inviting briefings from interested parties on whether the Board should continue to follow those cases. After 19 months of briefing and review, the Board’s Stericycle decision announced a new standard and overruled both Boeing and LA Specialty Produce.

In Stericylce, the Board found that Boeing and LA Specialty Produce failed to adequately protect employee rights by failing to appreciate that employees are “economically dependent” on employers. Thus, the Board’s new analysis of handbooks and work rules is focused on whether a reasonable employee “could” reasonably interpret the rule to have a “coercive meaning” to an employee exercising rights under the NLRA. If so, then the rule is presumptively illegal.

The use of the word “could” is significant. Under Stericycle, it does not matter if there is another reasonable, noncoercive interpretation so long as “an employee could reasonably interpret the rule to have a coercive meaning.”  The employer’s intent in maintaining the rule does not matter.

The Board also clarified the perspective of this “reasonable employee.” The Board stated the relevant “reasonable” perspective is that of “an employee who is subject to the rule and economically dependent on the employer” and who “contemplates engaging in protected concerted activity.” The Board noted that ambiguous rules would be interpreted against the employer. Thus, ambiguous rules will likely be presumed to be illegal.

Once a presumption of illegality arises, the employer must prove “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 did not address how much cost or administrative burden employers must face in order to administer the more narrowly tailored rule.

The Board also stated that the Stericycle decision would have a retroactive effect on all cases currently before the Board. Based on prior guidance memos, it is likely that the General Counsel for the NLRB will seek to apply this new standard to work rules that are currently in place.

Looking Forward

The Stericycle decision will clearly make it more difficult for employers to issue and maintain policies and rules governing employee conduct. It remains to be seen if this case will be appealed to the federal courts and how this decision would fare on appeal.  In his dissent, board member Marvin E. Kaplan spoke of an “unbalanced emphasis on employee rights . . . at the expense of legitimate employer interests,” which he saw as being inconsistent with the majority of decisions in this area.  It may be that future courts – or future Boards – will share this concern.

In the meantime, employers should review their employee handbooks and policies to remove any ambiguity that could give rise to a presumption of illegality under Stericycle. Employers should also carefully consider their rules and policies in light of this new decision and the operational needs of the enterprise.