Companies Must Rethink Handbooks in Wake of Labor Board Shift

Many companies likely must reevaluate their current workplace policies under a new National Labor Relations Board standard issued amid an increase in US labor organizing.

The NLRB’s Aug. 2 ruling in Stericycle Inc. scrapped employer-friendly standards the board set in 2017 for evaluating the legality of rules that govern a wide array of employee conduct. The agency tossed its Trump-era Boeing Co. precedent and reset its standard closer to the one it laid out in a 2004 decision, Lutheran Heritage Villa, with slight modifications.

When deciding whether a handbook or workplace policy is unlawfully restricting workers’ rights, the board will first consider if an employee could find that policy to be limiting their ability to take action collectively with their co-workers. But Stericycle differs from Lutheran Heritage by giving employers the opportunity to prove to the NLRB that the provision in question serves to “advance legitimate and substantial business interests.”

“Will employers be surprised by this ruling? Likely no,” said Raeann Burgo, attorney at management-side firm Fisher & Phillips LLP. “But many will be used to applying the Boeing principle to their handbooks so everyone will have to take a very close look at them and make sure they’re tailored to fit the board’s requirements.”

Isaac Caverly, an associate at Polsinelli Law Firm, said the board’s ruling doesn’t give employers an adequate idea of what a “legitimate and substantial” business interest looks like. Employers can look to previous guidelines that were established under Lutheran Heritage, he said, but they will be expecting further guidance from the NLRB general counsel.

“The board essentially offers no guidance on example provisions,” Caverly said. “There are clues but the majority essentially says ‘we’ll figure it out when we get there.’”

Reevaluating current workplace policies is especially important for employers that are in the middle of new union campaigns or in industries with high unionization rates, such as the utilities and transporation sectors, they said.

‘Great Opportunities’

Employers must re-evaluate non-disparagement provisions and confidentiality clauses, in particular, Caverly said.

“Companies are going to have to look at the framing of these provisions and figure out what exactly they’re trying to protect,” he said. “They’re going to have to ask ‘is there a way to make this more specific or will we feel confident defending this against the NLRB?’”

It can be easy for employees to interpret certain provisions like non-disparagement and confidentiality clauses as prohibiting activity that’s protected by federal labor law, said Seth Goldstein, partner at union-side firm Julien, Mirer, Singla, and Goldstein PLLC.

“When people read handbooks and there’s language they don’t exactly understand, they’re going to act cautiously because they don’t want to get fired,” Goldstein said. “If there’s a vague confidentiality clause, employees might think that involves talking to coworkers or to a union about their working conditions. And if you can’t do those things, then you can’t unionize.”

The board’s move could spur an increase in unfair labor practice charges against employers at the NLRB, as workers and unions seek to overturn employment provisions seen as chilling organizing rights.

Goldstein, who represents Trader Joe’s United, said the union has filed several ULPs that will likely proceed to formal complaints under the new standard.

The union is alleging that Trader Joe’s social media, confidentiality, and worker conduct policies violate federal labor law and unfairly restrict workers’ ability to organize. Goldstein said he and other union lawyers should be “pulling out the handbooks” to see if they include now-unlawful language.

“We’re going to have to take a fresh look at things that, under Boeing, we weren’t going to be able to challenge,” he said. “This gives us great opportunities to push forward.”

Balancing Employers, Workers

The NLRB’s lone Republican, Marvin Kaplan, said the ruling tips the balance too far toward workers, in a statement slamming the move.

The board’s Democratic members “fail to explain why their standard, which claims to balance these interests but inherently privileges employee rights while placing scant, if any, weight on employer interests, is any better,” Kaplan said.

Still, employers have more of an opportunity, under Stericycle, to argue for the legality of their workplace policies before the board than they did under either Boeing or Lutheran Heritage, Mark Pearce, a Georgetown University law professor and former Democratic NLRB chairman, said.

“It appears to me that the dissent does not want the employer to have to work hard in issuing its rules,” Pearce said of Kaplan’s stance. “The employer is dictating the atmosphere in the workplace. Therefore, it’s the employer that has the obligation to make clear that the rules are not designed to deprive the employees of their rights.”

In the coming months, the board will also likely be remanding a large number of administrative law judge decisions for reconsideration under Stericycle. It remanded dozens of rulings after issuing Boeing during the Trump administration, giving companies such as Securitas Security Services USA and AmeriFirst Financial Inc. another chance to prove that their handbooks were within the law.

“If cases have been litigated solely on the Boeing standard, then the parties have the right to get up there and make their arguments on the Lutheran Heritage standard if that’s what we’re returning to,” Pearce said.