Why compliance-minded employers should review their employee handbooks now

Recently, in Stericycle, Inc. and Teamsters Local 628, a majority of the National Labor Relations Board (Board) adopted a new standard that could make employer work rules unlawful under the National Labor Relations Act (NLRA), even if they do not explicitly prohibit employees from engaging in protected concerted activities under Section 7 of the NLRA, such as forming or joining a union, and collectively bargaining wages and other working conditions.

In light of this, employers should consider whether their existing employee handbooks and other workplace policies and rules are still compliant, and what steps can be taken to mitigate related legal risks.

The new standard

Going forward, the Board will analyze challenged workplace rules by assessing whether they have a "reasonable tendency to chill employees" in the exercise of their Section 7 rights. Workplace rules will be scrutinized "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."

If the Board's General Counsel shows that an employee could reasonably interpret an employer rule as restricting protected activities, then the rule will be presumptively unlawful. This will be so even if the rule could reasonably be interpreted so as to not restrict protected activities, and even if the employer had no unlawful intent.

On the other hand, "an employer may rebut this 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 has thus adopted a fact-specific standard, which will involve examining the "specific wording of the rule, the specific industry and workplace context in which it is maintained, the specific employer interests it may advance and the specific statutory interests that it may infringe."

Anticipating criticisms that the new standard will sacrifice clarity and predictability for employers, the Board has stated that it will aim to ensure that like cases are decided alike so that the "nearer the wording of a specific rule is to a rule assessed in a prior case, or the nearer the workplace context or employer interests are to those factors previously considered, the more likely the Board's determination of the rule's legality will be the same."

The Board has also clarified that it does not intend to find rules to be unlawful if a coercive interpretation of them is merely conceivable as opposed to being reasonable.

Moreover, rules are not to be interpreted by focusing only on isolated words or phrases found within them. Rather, rules are to be interpreted as a whole and in light of the totality of the factors noted above.

Retroactivity

The new standard will be applied retroactively to all pending cases, at whatever stage of litigation, unless doing so "would amount to a manifest injustice", which involves a consideration of, among other things, the reliance of a party on the pre-existing law, and the effect of retroactivity on the accomplishment of the purposes of the NLRA, which the Board sees as mainly the protection of the "right of employees to organize for mutual aid without employer interference".

Remedies

The Board has stated that "to the extent that a rule in a pending case is now found to be facially unlawful … the remedy will be an order to rescind the rule, leaving the employer free to replace the rule with a more narrowly tailored substitute." However, employers should be aware that there is potential for more expansive remedies than this, depending on the facts of the case.

Our views

The Board's new standard for assessing the lawfulness of employer rules under the NLRA will no doubt be challenging for employers. And it is anticipated that in the current context there will be an increase in unfair labor practice charges aimed at employer rules that are not expressly anti-union but which could be characterized as such under the Board's new standard.

Employers need to keep in mind that ambiguous rules will be construed against them. And so, at the very least, they should review existing employee handbooks, policies and rules with the new standard in mind, and with a view to defensibility in light of what has been reviewed above.

Employers should adopt a critical view of their existing workplace rules, asking themselves (and possibly even documenting in the rule) what legitimate and substantial business interests justify the rule. Overbroad rules that are not truly necessary to achieve these business interests could be proactively narrowed to make them more defensible. Specific examples of how the rule will be applied could be stated so as to reduce ambiguity as to the rule's intended scope and effect.

The surest way to achieve compliance in this area may be as was stated by dissenting Board Member Marvin Kaplan, who wrote:

"Employers would be well advised to … avoid a finding of presumptive unlawfulness in the first place by retaining competent labor counsel to craft, for inclusion in their employee handbooks, language that would make it impossible—even for my colleagues' version of the reasonable employee—to interpret any rules contained therein to restrict Section 7 activity."

Experienced labor counsel can be of particular assistance given their access to knowledge of what sorts of rules have been upheld by the Board in previous decisions, and through the exercise of professional judgment as to whether past precedents will provide a safe harbor to employers going forward.