The NLRB's Stericycle Decision and What it Means for Employer Handbook Rules

On August 2, 2023, the National Labor Relations Board (“Board”) issued its much-anticipated decision in Stericycle, Inc. concerning employee handbook rules. As expected, the Board changed its rule again, adopting the employee-friendly standard. The new standard is a dramatic change from the standard that had been in place for the last six years and impacts nearly all employers, unionized or not. 

A Brief History of Workplace Rules Standard

In 2004, the Board issued a landmark decision in Lutheran Heritage Village-Livonia.  It held that a policy, rule, or handbook provision violated the National Labor Relations Act (“NLRA”) if an employee could reasonably construe a workplace rule as preventing them from exercising their rights under the NLRA.  In 2017, the Trump Administration’s Board overturned the Lutheran Heritage standard. In the Boeing case, the Board held that the lawfulness of work rules was subject to a balancing test. The test weighed the employer’s legitimate reasons for the rule and balanced it against whether the rule could also have a chilling effect on the employees’ right to organize or otherwise engage in protected concerted activity. If the potential adverse impact on protected rights outweighed justifications associated with the rule, then the Board designated that rule as lawful. The Board also emphasized that having an overly broad rule was not enough by itself to breach the NLRA. In other words, this approach gave deference to an employer’s legitimate business interests in maintaining workplace policies.

The New Stericycle, Inc. Standard 

In the new Stericycle decision, the Board concluded that the standard established in Boeing and its progeny allowed employers to enact overly broad work rules that discouraged employees from exercising their NLRA rights. The Board reasoned that, as a result, Boeing failed to adequately protect employee rights. The Board overruled Boeing and adopted a new version of the Lutheran Heritage standard.

Under the new framework, the General Counsel must prove that a challenged rule has a reasonable tendency to chill employees from exercising their NLRA rights. The Board’s new analysis of handbooks and work rules thus focuses on whether an employee could reasonably interpret the rule in question to have a “coercive meaning,” even if a contrary, non-coercive interpretation of the rule is also reasonable. The Board clarified that it would interpret the rule from the perspective of an employee who is subject to the rule and economically dependent on the employer, and who also contemplates engaging in protected concerted activities. If the General Counsel is able to prove this, then the rule is presumptively unlawful. The employer can rebut this presumption by demonstrating that the rule serves a valid and substantial business interest and that there is no narrower rule available to achieve interest. The Board also noted that ambiguous rules would be interpreted against the employer. This new standard applies retroactively.

Employer Considerations

The Stericycle case means the Board will be looking more critically at workplace rules, and it is likely that unfair labor practice allegations will increase. Moving forward, Employers, regardless of whether they are unionized or not, should review their employee handbooks to ensure compliance with the Board’s new employer handbook standards.