August 4, 2023Client Alert

The NLRB Adopts New Employee-Friendly Standard for Evaluating Whether Workplace Rules and Policies Are Unlawful, Continuing its Retreat from President Trump Era Rulings

On August 2, 2023, the National Labor Relations Board (“Board”) issued its long-awaited decision in Stericycle, Inc., 372 NLRB No. 113 (2023), whereby it adopted a new legal standard for evaluating whether an employer’s workplace rules and policies unlawfully restrict or chill its employees’ rights under Section 7 of the National Labor Relations Act (“Act”). In a split decision decided along party lines, the majority members of the Board rejected the legal standard the Board has used since 2017, opting instead to create a two-step, “case-by-case approach” that examines “the specific language of particular rules” and “the employer interests actually invoked to justify them.” As explained below, and as the Board acknowledged, the new standard favors employees over employers, and reflects a growing trend of Board decisions reversing decisions from the Trump era.

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Critically, Stericycle potentially impacts a variety of workplace policies, including those addressing employee confidentiality, social media activity, recordings in the workplace, and workplace conduct rules. Section 7 makes it an unfair labor practice for covered employers (e.g., most private sector employers) to interfere with, restrain, or coerce employees in the exercise of certain rights, such as employees’ right to form a union, bargain with their employer over terms and conditions of employment, and/or join together in other ways for their mutual aid and protection.  

The Pre-Stericycle Standard

Although the Board’s level of scrutiny regarding employers’ workplace policies has varied over the years, the standard in place immediately before Stericycle provided a balanced approach for employers and employees. In Boeing Co., 365 NLRB No. 154 (2017), as later clarified in LA Specialty Produce Co., 368 NLRB No. 93 (2019), the Board’s legal standard balanced an employer’s and its employees’ interests and provided specific guidelines on which categories of work rules were likely lawful, unlawful, or required more individualized scrutiny. These decisions explained that an employer’s workplace policy should not be found unlawful just because it “can” be interpreted in an unlawful way. Rather, they emphasized that the Board should consider the nature and extent of a policy’s impact on an employee’s Section 7 rights – as well as the employer’s legitimate reasons for a policy – before determining whether a policy violates Section 7 of the Act. 

The New Stericycle Standard 

In Stericycle, the Board expressly rejected Boeing’s and LA Specialty Produce’s legal standard for evaluating employer workplace policies, as well as the guidance those cases provided regarding what policies are likely to be lawful versus unlawful. In lieu of Boeing’s balancing test, the Board outlined a new, two-step process for determining whether language in an employer’s workplace rule or policy constitutes an unfair labor practice.

Step 1:  General Counsel Burden – In the first step, the General Counsel has the burden to establish that a work rule has a reasonable tendency to chill (restrict or prohibit) employees from exercising their Section 7 rights. In analyzing this question, the Board will interpret the rule from the perspective of an employee who is “economically dependent” on the employer and, according to the Board, an employee who is therefore inclined to interpret an ambiguous rule as prohibiting protected activity she would otherwise engage in. The Board will review the policy’s language from the viewpoint of a layperson, not a lawyer. If an employee could reasonably interpret policy language to restrict or prohibit Section 7 protected activity, then the General Counsel has met her initial burden to demonstrate that the policy is presumptively unlawful. This conclusion is true even if language in the policy could also reasonably be interpreted to not restrict Section 7 rights, and even if the employer did not intend for its policy to restrict Section 7 rights.

Step 2:  Employer Rebuttal - If the General Counsel satisfies her burden of demonstrating a presumptively unlawful policy at the first step, then the employer has a chance at the second step to 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.” The Board explained that unlike the Boeing standard, it is no longer enough for the employer’s legitimate interest in the workplace policy to outweigh the burden on an employee’s rights. Instead, the employer now has to show that the employer’s interests, even if legitimate, could not be advanced by a more narrowly crafted policy. The Board compared this burden as “akin to an affirmative defense that [the employer] has the burden of sustaining to overcome the presumption that a given work rule is unlawful.” If, at the second step, the employer meets this burden, the work rule or policy will be found lawful.

Retroactive Effect

In its decision, the Board confirmed that the Stericycle decision is retroactive. As the Board noted, it usually applies new policies and standards retroactively “to all pending cases in whatever stage, unless doing so would amount to manifest injustice.” The Board determined no “manifest injustice” would result from retroactive application of Stericycle, emphasizing in part that “the remedy will be an order to rescind the rule, leaving the employer free to replace the rule with a more narrowly tailored substitute.”  

Take-Aways and Recommended Next Steps

Unfortunately, the Board did not analyze the underlying work rules at issue in the case, which could have provided more concrete guidance on how to apply this new legal standard. Instead, the Board remanded the case to provide the parties an opportunity to argue the merits of the case pursuant to the new standard. Regardless of the particular facts in Stericycle, the decision makes clear that workplace rules and policies will be subject to significantly increased scrutiny by the Board. As a result, we recommend that private sector employers review their existing policies and handbook language, and work with their labor and employment law counsel to determine if any changes are recommended in light of this new decision.

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