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There was little doubt that the current National Labor Relations Board (NLRB or the “Board”) would overrule the Trump-era test in The Boeing Company for evaluating work rules in favor of a more employee-friendly standard. The new standard has arrived, and employers may want to start reviewing their handbooks to comply with it.

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On August 2, 2023, the NLRB issued its decision in Stericycle, Inc., 372 NLRB No. 113 (2023), changing (again) the test for evaluating facially neutral work rules. This was not good news for employers. Stericycle overrules Boeing’s more predictable approach and, according to dissenting Board Member Marvin Kaplan, returns to a “bygone era … when the Board majority rarely saw a challenged rule it did not find unlawful.”

The Board’s new test provides that a work rule is unlawful if an employee “could reasonably interpret the rule to have a coercive meaning … even if a contrary, noncoercive interpretation of the rule is also reasonable.” The Board added that the employer’s intent is irrelevant and that the rule will be evaluated through the lens of an employee who is “economically dependent on the employer, and who also contemplates engaging in protected concerted activity.” If an employee could reasonably interpret the rule to restrict protected activity, the rule is presumptively unlawful.

An “employer may 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 did not explain what a “legitimate and substantial business interest” includes or how it would look to see if a rule could be more “narrowly tailored,” leaving employers without much guidance on how the new test will operate.

The Board has signaled a return to its hypervigilant work rule analysis that existed pre­-Boeing, and here is why …

Back to the Future, Sort of

Stericycle purports to resurrect a modified version of the Bush-era Lutheran Heritage standard. Under the Lutheran Heritage standard, a facially neutral work rule that was not made in response to or applied to restrict protected activity was unlawful if employees would reasonably construe the language to prohibit protected activity. Lutheran Heritage’s “reasonably construe” analysis required the Board to (i) “refrain from reading particular phrases in isolation,” (ii) “not presume” that a rule will cause “improper interference with employee rights,” and (iii) not conclude “that a reasonable employee would read [a] rule to apply to [Section 7] activity simply because the rule could be interpreted that way.”

Stericycle, however, expressly rejects Lutheran Heritage’s “reasonably construe” standard and looks at work rules to find whether a reasonable employee could, not would, interpret the work rule to have an improper restriction on protected rights (more on this below). But that does not mean this test is new to employers. It appears that the NLRB is not actually resuscitating Lutheran Heritage but instead reviving the extremely pro-employee decisions and analysis promulgated by the Board between 2011 to 2017 that led to Lutheran Heritage’s demise. Indeed, in his lengthy dissent, Member Kaplan maintained that during those six years, the NLRB was not actually applying the Lutheran Heritage test but was really applying a standard articulated in the stringent tests proposed in dissents to Lutheran Heritage and in the Board’s 1998 decision in Lafayette Park Hotel. As explained by the Board in Boeing, the issue with Lutheran Heritage was not the test itself but the application. “Though well-intentioned,” the Board stated, Lutheran Heritage produced confusion and failed to account for real-world complexities. The Boeing majority stated that the Board’s “zeal” contributed to the inconsistent results. It seems that the Board is returning to that standard.

Replacing Boeing’s Reasonable Employee with the ‘Eggshell’ Employee

Under Boeing, the NLRB had the initial burden to prove that a facially neutral rule would in context be interpreted by a reasonable employee to potentially interfere with the exercise of Section 7 rights. The NLRB defined a reasonable employee as one who is “aware of his legal rights but who also interprets work rules as they apply to the everydayness of his job. The reasonable employee does not view every employer policy through the prism of the [National Labor Relations Act].” If the NLRB met its initial burden, Boeing required “a balancing of that potential interference against the legitimate justifications associated with the rule.”

Stericycle, however, uses no such reasonable employee standard. Instead, the NLRB presumes that a rule is unlawful if any employee could interpret the rule to restrict protected activity regardless of whether an employee would interpret the rule that way. The majority claims that a reasonable employee is anxious to avoid discharge and is inclined to construe an ambiguous work rule to restrict protected activity. In his dissent, Member Kaplan argues that the majority creates the labor law equivalent to an eggshell-skull plaintiff — someone who is predisposed to read prohibitions on protected activity into neutral work rules and does not engage in protected activity until examining every work rule.

The Employer’s Rebuttal

At first glance, a chance to rebut an unlawful work rule is a welcome addition that did not exist under Lutheran Heritage. Stericycle provides that an employer may rebut a finding that a work rule is unlawful by showing it had a “legitimate and substantial business interest” in maintaining the rule and the rule could not be more “narrowly tailored.” Because the NLRB did not provide any guidance on the employer’s rebuttable standard, however, only time will tell how it will be interpreted and what standard will actually be applied.

Further Guidance. The Stericycle decision leaves much to be desired in terms of clarity and how the Board will apply the test, especially the employer’s rebuttal burden. Until the Board issues decisions applying Stericycle, hopefully the General Counsel will issue a memorandum similar to the one issued post-Boeing, explaining how she intends to enforce Stericycle and what employers can do to comply.

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Monday Morning Quarterbacking. One of the major issues with the rebuttal burden is how an employer can fashion a rule so that it could not be more narrowly tailored. Work rules do not cover incidents; they cover a broad range of types of misconduct. As Member Kaplan aptly points out, it is virtually impossible to craft work rules that are general enough to serve their intended lawful purpose without being susceptible to an interpretation that infringes on protected rights. For example, almost every employer maintains workplace civility rules that cover any number of situations. Crafting rules that maintain order but cannot be more narrowly tailored will prove to be a daunting task.

What About Disclaimers. The Board left open the possibility of “safe harbor” language but stated that it will “evaluate any explanations or illustrations contained in the rule regarding how the rule does not apply to [protected] activity.” Given the pre-Boeing case law that generally disfavored such disclaimers, this is not something upon which employers can rely with any certainty.

Start Reviewing Now. Until the Board begins ruling on the legality of certain handbook rules, employers would be wise to start the process of reviewing their handbooks using cases from 2011 to 2017 as a baseline. The Board’s decisions going forward will likely be aligned with decisions from that period based on the Board’s characterization that the new test is a modified version of the Lutheran Heritage test. Also, while we cannot predict exactly how the current General Counsel will interpret Stericycle, employers may want to review the memorandum that the Obama-era General Counsel issued regarding employer rules (Memorandum GC 15-04). That memorandum should give employers an idea of the types of policies that may be the subject of litigation over the next few years.

Retroactive Application. The decision applies not only to new allegations but also to all pending unfair labor practice charges. Employers with existing charges need to look at their work rules under the new Stericycle test.

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Should you need to discuss this decision and its effect on your organization in greater detail, the BakerHostetler Labor and Employment Practice Group is available to assist.

Here We Go Again: The National Labor Relations Board Reintroduces Chaos to Employee Handbooks