Implications of the NLRB’s Opinion in Stericycle on Non-Union Employers

The National Labor Relations Board (the NLRB) recently adopted a new legal standard for the evaluation of employer work rules that are challenged as being unlawful. What this rule means for employers covered by the National Labor Relations Act (NLRA), including non-unionized employers, is addressed in this article. First, however, a brief and general overview of the NLRA, as well as the NLRB and its functions, might be helpful.

The NLRA

The NLRA is a federal law passed in 1935 to protect the right of employees to collectively bargain with private sector employers for better working conditions.

The NLRA applies to most private sector employers (Covered Employers).  The NLRA does not apply to federal, state, or local governments; employers who employ only agricultural workers; and employers subject to the Railway Labor Act (interstate railroads and airlines). In addition, the NLRA does not cover independent contractors and supervisors (with limited exceptions)[1]. 

All non-management employees of Covered Employers are afforded the rights and protections of the NLRA. Under the NLRA, employees have the right to unionize, to join together to advance their interests as employees, and to refrain from such activity. It is unlawful for an employer to interfere with, restrain, or coerce employees in the exercise of their rights.

Section 7 of the NLRA guarantees employees "the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection," as well as the right "to refrain from any or all such activities." These are often referred to as Section 7 rights. According to the NRLB, activity is "concerted" if it is engaged in with or on the authority of other employees, not solely by and on behalf of the employee himself. It includes circumstances where a single employee seeks to initiate, induce, or prepare for group action, as well as where an employee brings a group complaint to the attention of management. Activity is "protected" if it concerns employees' interests as employees. An employee engaged in otherwise protected, concerted activity may lose the NLRA’s protection through misconduct.

Section 8(a)(1) of the NLRA makes it an unfair labor practice (ULP) for an employer "to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7" of the Act. For example, employers may not: threaten employees with adverse consequences, such as closing the workplace, loss of benefits, or more onerous working conditions, if they support a union, engage in union activity, or select a union to represent them; threaten employees with adverse consequences if they engage in protected, concerted activity; or promise employees benefits if they reject the union.[2]

The NLRB

The NLRB is the federal agency created to enforce the NLRA.  Headquartered in Washington DC, it has regional offices across the country where employees, employers and unions can file charges alleging illegal behavior, or file petitions seeking an election regarding union representation.

The NLRB has five members and primarily acts as a quasi-judicial body in deciding cases on the basis of formal records in administrative proceedings. Board members are appointed by the President to 5-year terms, with Senate consent, the term of one member expiring each year. Therefore, the composition of the Board is impacted by the President, and the written opinions of the NLRB often reflect the prevailing policies of the sitting President.

Employees who wish to assert an unfair labor practice claims against an employer or union must file the charge with the NRLB. The NLRB's Administrative Law Judges docket, hear, settle and decide unfair labor practice cases nationwide, operating through offices in Washington, New York, and San Francisco.

Employee Remedies for Violations of the NLRA

There is no private right of action under the NLRA; therefore, an employee cannot pursue a claim under the NLRA in federal court. An employee must seek remedies under the NRLA through the NLRB.

Under the current provisions of the NLRA, the NLRB cannot issue penalties against employers or unions who violate the NLRA. Until recently, the NLRB only sought make-whole remedies for employees whose rights had been violated under the NLRA such as reinstatement, backpay for discharged workers, and informational remedies such as a notice by employers promising not to violate the law.

In a recent NLRB opinion, Thryu, Inc., 372 NLRB No. 22 (Dec. 13, 2022, the Board expanded its authority to include award consequential damages in ULP cases. In Thryu, the Board broadened the traditional make-whole relief available to workers and included “out-of-pocket medical expenses, credit card debt, or other costs simply in order to make ends meet.” Employees must provide evidence substantiating alleged consequential damages.

Employer Facially Neutral Work Rules and the NLRA

The issue of whether facially neutral work rules and handbook provisions run afoul of the NLRA has been heavily litigated in recent years, impacting both unionized and nonunionized employers.

Prior to 2017, the NLRB evaluated whether employer rules, such as those often found in employee handbooks and codes of conduct, interfere with, restrain, or coerce employees in their Section 7 rights under a standard first announced in Lutheran Heritage Village-Livonia. Under that standard, a workplace rule was unlawful if “employees would reasonably construe the language to prohibit Section 7 activity.”

In 2017, a Republican-majority NLRB overruled Lutheran Village and established in its place a framework for evaluating employer workplace rules. In Boeing Co. (as later clarified in LA Specialty Produce Co.), the Board overturned Lutheran Heritage and set forth a framework for determining whether a facially neutral policy, rule, or handbook provision, when reasonably interpreted, potentially interfered with employees’ exercise of NLRA rights. Under that framework, Boeing classified work rules into three categories: (1) policies that were always lawful, (2) policies that were subject to individualized scrutiny, and (3) policies that were always unlawful. Id. When work rules required individual scrutiny, the NLRB evaluated a rule by (i) the nature and extent of the potential impact on rights under the NLRA, and (ii) the employer’s legitimate justifications associated with the rule. Under Boeing, the Board would find that the rule’s maintenance violated the NLRA if the business justifications for the rule were outweighed by the adverse impact on employees’ Section 7 rights.

Two years later in LA Specialty Produce, the Board further clarified that work rules should not be scrutinized to find any and all potential applications that may restrict NLRA-protected activity and must be interpreted from “the standpoint of reasonable employees,” not “labor lawyers.” The Board also emphasized that the burden of proof is on the NLRB General Counsel to show that the rule in question interferes with NLRA rights.

The NLRB’s Opinion in Stericycle

In Stericyle, issued August 2, 2023, the Board rejected the standard from Boeing and LA Specialty Produce because it concluded that the standard “fails to account for the economic dependency of employees on their employers. Because employees are typically (and understandably) anxious to avoid discharge or discipline, they are reasonably inclined both to construe an ambiguous work rule to prohibit statutorily protected activities and to avoid the risk of violating the rule by engaging in such activity.”

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. “[T]he employer’s intent in maintaining a rule is immaterial. Rather, if an employee could reasonably interpret the rule to have a coercive meaning, the General Counsel will carry her burden, even if a contrary, non-coercive interpretation of the rule is also reasonable.” Once the General Counsel meets her burden, then the rule is presumptively unlawful.

However, the employer may rebut the presumption by proving that the work 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.

In evaluating whether work rules violate the NLRA, “the Board will interpret the rule from the perspective of the reasonable employee who is economically dependent on her employer and thus inclined to interpret an ambiguous rule to prohibit protected activity she would otherwise engage in. The reasonable employee interprets rules as a layperson, not as a lawyer.”

Work Rules Potentially Implicated by Stericycle and Merit Re-Examination in Light of the Board’s Opinion

Work rules that were not written or designed to explicitly restrict Section 7 activity and/or were not promulgated in response to Section 7 activity (these are per se violations of the NLRA) but that can be construed to chill or inhibit employees from exercising their rights under the NLRA are vulnerable to challenge. Such work rules include those that:

• Restrict or limit video or cell phone recordings;
• Restrict employees' use of social media;
• Prohibit or restrict criticism, negative comments, and disparagement of the company's management or the company, in general.
• Promote “civility;”
• Prohibit insubordination;
• Require confidentiality of investigations and complaints;
• Outline specific rules for safety complaints;
• Restrict the use of company-provided communication resources, such as email or Slack;
• Restrict meetings with co-workers or the circulation of petitions.
• Prohibit or limit comments to the media or government agencies.

The NLRB’s opinion does not prohibit all such work rules; however, careful consideration must be made regarding the legitimate and substantial business interest prompting the work rule and whether the rule has been narrowly tailored so that it can be viewed (by a reasonable employee) to chill Section 7 rights.

Section 7 rights concern work-related issues about the terms and conditions of employment; an individual, self-interested “gripe” in and of itself about work is not considered protected activity. Consider the NLRB’s guidance to workers given on its website addressing Social Media activity and what constitutes Concerted Activity:

Social media

Even if you are not represented by a union, federal law gives you the right to band together with coworkers to improve your lives at work - including joining together in cyberspace, such as on Facebook.

Using social media can be a form of "protected concerted" activity. You have the right to address work-related issues and share information about pay, benefits, and working conditions with coworkers on Facebook, YouTube, and other social media. But just individually griping about some aspect of work is not "concerted activity": what you say must have some relation to group action, or seek to initiate, induce, or prepare for group action, or bring a group complaint to the attention of management.

Concerted activity

Federal law protects employees engaged in union activity, but that's only part of the story. Even if you're not represented by a union - even if you have zero interest in having a union - the National Labor Relations Act protects your right to band together with coworkers to improve your lives at work.

You have the right to act with coworkers to address work-related issues in many ways. Examples include: talking with one or more co-workers about your wages and benefits or other working conditions, circulating a petition asking for better hours, participating in a concerted refusal to work in unsafe conditions, and joining with coworkers to talk directly to your employer, to a government agency, or to the media about problems in your workplace. Your employer cannot discharge, discipline, or threaten you for, or coercively question you about, this "protected concerted" activity. However, you can lose protection by saying things about your employer that are egregiously offensive or knowingly and maliciously false, or by publicly disparaging your employer's products or services without relating your complaints to any labor controversy.

Clients, therefore, are encouraged to examine their work rules in light of the NLRB’s new assessment for challenging these facially neutral policies, keeping in mind that they cannot inhibit their employees’ Section 7 rights. Our team of Board Certified Labor and Employment attorneys stand ready to help.

[1] When a supervisor engages in activity designed to further or protect the rights of employees who are covered by the NLRA, that supervisor’s actions will be governed and protected by the NLRA.  See, e.g., See, e.g., Texas Dental Assoc., 354 N.L.R.B. No. 107 (Nov. 25, 2009). A supervisor at a dental association was fired after she refused to divulge the names of employees who had anonymously signed a petition protesting top management. The Board found the discharge was unlawful because she had rightfully refused to violate federal labor law by punishing concerted activity. In a settlement, the supervisor and another former employee waived reinstatement in exchange for $900,000 in lost wages and benefits.  

[2] For a more exhaustive list of all of the employer activities deemed “unfair labor practices” consult the NLRB’s website at https://www.nlrb.gov/about-nlrb/rights-we-protect/the-law/interfering-with-employee-rights-section-7-8a1.