The NLRB issued a decision in Stericycle Inc., adopting a new legal standard for evaluating employer work rules challenged as facially unlawful under Section 8(a)(1) of the National Labor Relations Act.

The decision overrules Boeing Co. (2017), which was later refined in LA Specialty Produce Co. (2019). The new standard builds on and revises the Lutheran Heritage Village-Livonia (2004) standard. The Board had previously invited parties and amici to submit briefs addressing whether the Board should reconsider the Boeing standard.

The former “Boeing Standard” established a new test: when evaluating a facially neutral policy, rule or handbook provision that, when reasonably interpreted, would potentially interfere with the exercise of NLRA rights, the Board will evaluate two things: (i) the nature and extent of the potential impact on NLRA rights, and (ii) legitimate justifications associated with the rule.

Applying the new standard, the Board concluded that Boeing lawfully maintained a no-camera rule that prohibited employees from using camera-enabled devices to capture images or video without a valid business need and an approved camera permit. The Board majority reasoned that the rule potentially affected the exercise of NLRA rights, but that the impact was comparatively slight and outweighed by important justifications, including national security concerns.

And pursuant to Boeing, the Board also announced that, prospectively, three categories of rules will be delineated to provide greater clarity and certainty to employees, employers, and unions.

In Stericycle, Board explained that the primary problem with the Boeing and LA Specialty Produce standard was that it permitted employers to adopt overbroad work rules that chill employees’ exercise of their rights under Section 7 of the Act. Under that standard, an employer was not required to narrowly tailor its rules to promote its legitimate and substantial business interests without unnecessarily burdening employee rights. The Board also rejected Boeing’s categorical approach to work rules, under which certain types of rules were held to be always lawful, regardless of how they were drafted or what interests a particular employer cited in defense of the rule.

Under the new standard adopted in Stericycle, the General Counsel must prove that a challenged rule has a reasonable tendency to chill employees from exercising their rights. If the General Counsel does so, then the rule is presumptively unlawful.

However, the employer may 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 proves its defense, then the work rule will be found lawful to maintain. In line with this framework, the Board rejected the categorical approach of Boeing in favor of case-specific consideration of work rules.

“Boeing gave too little consideration to the chilling effect that work rules can have on workers’ Section 7 rights.  Under the new standard, the Board will carefully consider both the potential impact of work rules on employees and the interests that employers articulate in support of their rules.  By requiring employers to narrowly tailor their rules to serve those interests, the Board will better support the policies of the National Labor Relations Act,” said Chairman Lauren McFerran.

Members Wilcox and Prouty joined Chairman McFerran in issuing the decision. Member Kaplan dissented.

The NLRB’s latest decision regarding workplace rules affects both unionized and non-unionized workplaces. The new standard will be applied retroactively, thus a workplace rule created under the Boeing Standard is likely unlawful.

In his dissent, Member Kaplan, among other issues, argued that the “Board must not apply a new rule of decision retroactively – meaning in all pending cases in whatever stage – if doing so would work a manifest injustice. SNE Enterprises, 344 NLRB 673, 673 (2005). To determine whether retroactive application would cause manifest injustice, the Board considers ‘the reliance of the parties on preexisting law, the effect of retroactivity on accomplishment of the purposes of the Act, and any particular injustice arising from retroactive application.’ Id. Each of these considerations militates against retroactive application.”

Kaplan also lamented that “the full breadth of my colleagues’ decision cannot be understood until the Board addresses the question of safe harbor language in future cases.”

NLRB Sets New Standard for Assessing Lawfulness of Work Rules