Management-side bar braces for fallout from ‘Stericycle’

NLRB subjects work rules to ‘employee-friendly’ test

Attorney Amy B. Royal was interviewed for this pivotal decision of the NLRB, by Massachusetts Lawyers Weekly's Pat Murphy.

A reversal of course by the National Labor Relations Board has management-side lawyers and their clients scrambling to reassess work rules for whether they may now be deemed unlawfully to chill employee rights to engage in concerted activity.

A divided NLRB issued its highly anticipated decision in Stericycle Inc. on Aug. 2. The decision announced a new standard on the question of whether an employer’s work rule that does not expressly restrict employees’ protected concerted activity under Section 7 of the National Labor Relations Act is nevertheless unlawful under NLRA Section 8(a)(1).

“[O]ur standard requires the General Counsel to prove that a challenged rule has a reasonable tendency to chill employees from exercising their Section 7 rights,” the Stericycle majority opinion states. “We clarify that the Board will 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 activity.”

Springfield labor lawyer Amy B. Royal says employers have their work cut out for them.

“Employers are going to have to look at any policies, handbooks and work rules that they have and ensure that they are narrowly tailored,” Royal says. “The ultimate burden on the employer is to demonstrate not just that they have a legitimate and substantial need for a particular work rule or policy, but that there’s no other way to accomplish this other than the way it is written. This is a huge departure [from recent NLRB decisions].”

Providence employment litigator Shelagh Michaud sees Stericycle as part of a larger trend of decisions and new laws leaning in favor of employee rights.

“In addition to rights to unionize and collectively bargain, there are also new rules, laws and guidance on noncompetes that lean toward allowing employees to have more portability and freedom once they leave an employer,” she says. “All of these changes are going to affect not just the way we structure [workplace] policies, but also employment agreements, separation agreements, and how we handle our expectations for key employees.”

One labor attorney not surprised by the outcome in Stericycle is Raymond M. Ripple of Boston.

“This is just one of several employee-friendly decisions handed down in the last six to eight months from the NLRB,” Ripple says. “It’s an unwinding of some of the things that were put into place under the prior administration and makeup of the NLRB.”

Ripple laments the fact that Stericycle creates uncertainty for employers.

“Before, [the question was] what a reasonable employee would think when reading this policy — would they interpret it to chill their Section 7 rights,” Ripple says. “Now, it’s going to be looked at from the perspective of an employee who is economically dependent on that employer and who wants to engage in some protected action. ‘Does that civility policy that’s in my employer’s handbook limit me in any way from exercising those rights?’”

Reversing course

An administrative law judge in Stericycle had found that the respondent employer violated Section 8(a)(1) by maintaining certain work rules addressing personal conduct, conflicts of interest, and the confidentiality of harassment complaints.

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.”

“Section 7 applies even when there is no union present,” says Daniel R. Fishman, an employment litigator in Boston. “So [the NLRB’s decision in Stericycle] is something both union and non-union employers need to be aware of.”

Section 8(a)(1) makes it an unfair labor practice for an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7.”

In reaching a decision in Stericycle, the ALJ followed the analysis in the NLRB’s 2017 ruling in Boeing Co., as interpreted by the board’s 2019 decision in LA Specialty Produce Co.

In Boeing, LA Specialty and subsequent cases, the board applied a standard recognizing that certain categories of work rules — such as rules of civility — are “lawful” when: (1) reasonably interpreted, they do not prohibit or interfere with the exercise of NLRA rights; or (2) the potential adverse impact on protected rights is outweighed by justifications for the rule.

But the board in Stericycle replaced the categorical approach of Boeing with a new standard focusing on how employees would interpret a particular work rule. In setting a new standard, the majority made clear that an employer’s intent in maintaining a rule is “immaterial.”

“Rather, if an employee could reasonably interpret the rule to have a coercive meaning, the [NLRB’s] General Counsel will carry her burden, even if a contrary, noncoercive interpretation of the rule is also reasonable,” the majority wrote. “If the General Counsel carries her burden, the rule is presumptively unlawful, but the 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.”

“[Stericycle] essentially imposes a ‘strict scrutiny’ standard on employers once that employee-friendly standard is met,” Michaud says.

Moving target?

In Stericycle, the board remanded the matter for the ALJ to apply the new standard in rendering a decision.

The majority in Stericycle included NLRB Chairman Lauren M. McFerran and members Gwynne A. Wilcox and David M. Prouty. President Biden named McFerran chairman in 2021, the same year he nominated Prouty. Wilcox is also a Biden nominee.

Member Marvin E. Kaplan — a 2017 appointee of President Trump — dissented in Stericycle. Kaplan argued that the board’s new standard places employers in an untenable position.

“The majority says that employers are free to maintain work rules that protect their legitimate interests, so long as they narrowly tailor their rules so that no word or phrase could possibly be interpreted, by a reasonable employee as my colleagues define that being — i.e., an unreasonably hypervigilant employee — to restrict Section 7 activity,” Kaplan wrote. “However, as the Board observed in Boeing, and as Chairman [William B.] Gould explained nearly 25 years ago in Lafayette Park Hotel, 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 Section 7 rights.”

To Providence labor attorney Matthew H. Parker, the shifting tides at the NLRB have gotten more than a bit tiresome for employers.

“Frustratingly, the NLRB’s standard for assessing the legality of workplace rules has been a moving target for decades,” Parker says. “Generally speaking, updating handbooks every few years as the political majority of the NLRB shifts back and forth is unnecessary and inefficient.”

Fishman couldn’t agree more.

“Employers like predictability,” he says. “If they know the rules to the game, they are more likely to follow them.”

According to Fishman, the board’s elimination of the categorical approach adopted in Boeing removes predictability for the employer.

Keeping things simple

Fishman says that employers should take Stericycle as an opportunity to review their employee handbooks and workplace policies that may touch on NLRA Section 7 rights.

In that regard, he notes that the NLRB’s general counsel has taken the position that employers can provide themselves with some measure of protection by adopting a prophylactic policy explicitly stating that the employer’s workplace policies and rules should not be interpreted as restricting NLRA Section 7 rights.

“If you’re focusing on how reasonable interpretations of a policy don’t chill Section 7 rights, a policy directly addressing that issue would be a big help in defending an unfair labor practice [allegation],” Fishman says. “For certain explicit policies, for example, policies that tell employees not to discuss wages with other employees, a prophylactic policy is not going to cut it. But it would certainly be helpful for [defending] more nebulous, facially neutral policies like social media policies or respect-in-the-workplace policies.”

According to Parker, one way to keep things simple is for the employer to view its workplace policies through the lens of a union agent who might try to challenge them.

“If there is no business need for a broad rule, narrow it. If you need to clarify that a rule does not restrict protected concerted activity, say so,” Parker advises. “If you assume that (a) sweeping and ambiguous rules will always draw scrutiny, and (b) every rule needs to be based upon a legitimate business interest, employers can avoid most challenges and still maintain appropriate standards.”

In gauging the kinds of workplace rules that will come under increased scrutiny under the Stericycle decision, Fishman points to social media policies.

“Any policies regarding bad language or respect in the workplace could find themselves being scrutinized for whether they meet this new standard,” he says.

More work for lawyers?

Fishman says it’s too soon to gauge whether the NLRB’s decision in Stericycle will spawn more legal challenges to workplace policies.

“But the change from Boeing to Stericycle certainly shifts the playing field [against] employers,” he says. “It’s going to be much harder for employers to prevail under Stericycle than they could under Boeing.”

Michaud’s practice in Providence includes a significant amount of advice to clients on the drafting of employment policies. Stericycle is likely to lead to increasing scrutiny of confidentiality and conflict-of-interest policies, she says.

“I could see the anti-moonlighting and noncompete provisions being ratcheted back,” Michaud says.

“I could also see [Stericycle affecting] how we do social media and technology policies, as well as employers that engage in monitoring or recording [employees]. There’s also a difference between what a policy states and what the practice is, so there will be a lot of training and retraining of not just those high-level employees and HR managers that help draft the policies, but also of those supervisors who implement the policies.”

Royal likewise sees Stericycle as having a broad reach.

“There could be implications for non-disparagement provisions, confidentiality provisions, codes of conduct — even dress codes,” the Springfield attorney says. “This is certainly a point in time when employers need to look at all of their policies and consult with their labor counsel to make sure those policies aren’t subject to challenge.”

According to Fishman, the big concern for employers is the termination of an employee under what is ultimately determined to be an overly broad workplace rule.

“If that person prevails — which they have a better chance to given Stericycle — that employee could get back pay and a reinstatement order, both of which are pretty costly in terms of dollars and headaches,” Fishman notes.