Many U.S. employers still don’t realize how much influence the National Labor Relations Board has over their workplaces. In a potentially wide-reaching decision, the federal labor board has changed its standard for applying the National Labor Relations Act to employer work rules. In other words, more rules and policies, such as those commonly found in employee handbooks, will be deemed unlawful by the NLRB if their validity is challenged.

Section 7 of the NLRA

Yes, the National Labor Relations Act gives employees the right to unionize for purposes of collective bargaining with their employers. But its protections don’t end there. The NLRA also affords employees the right to take other actions short of unionization.

Section 7 of the Act grants 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. . . . (It also grants the less policed right “to refrain from any or all such activities.”)

It is the protection for engaging in concerted activities for their mutual aid or protection that can be relied on to protect employees in workforces that are not represented by a union and may not even be seeking to unionize.

How Does Section 7 Affect Employee Handbooks?

The National Labor Relations Board does not permit employers to adopt workplace policies that unduly restrict employees in exercising Section 7 rights. For example, policies prohibiting employees from discussing compensation have long been deemed unlawful. How and where to draw the line, however, has been a hotly debated topic at the Board for at least the past couple of decades.

Both sides of this debate generally agree that the question is when do employer work rules go too far that they would have a tendency to chill protected employee activity. Again, employees usually have the right to share their salaries to enable them to seek better pay. So, a rule prohibiting them from discussing compensation is assumed to credibly “chill,” or prevent, such discussions without any compelling legal interest on the employer’s part. But many other employer work rules are more readily justified by legitimate purposes. Thus, the question becomes, what’s more important–the employer’s interests or the employee’s potential exercise of Section 7 rights?

Previous Standard on Employer Work Rules

In a series of decisions beginning in 2017, a Republican-majority labor board reinstituted standards for scrutinizing employer policies that give more weight to employers’ business interests. As explained by the General Counsel of the NLRB at the time, many categories of rules usually would not violate the NLRA “either because the rule, when reasonably interpreted, does not prohibit or interfere with the exercise of rights guaranteed by the Act, or because the potential adverse impact on protected rights is outweighed by the business justifications associated with the rule.”

Such “usually lawful” rules included:

• Civility Rules
• No-Photography Rules and No-Recording Rules
• Rules Against Insubordination, Non-cooperation, or On-the-job Conduct that Adversely Affects Operations
• Disruptive Behavior Rules
• Rules Protecting Confidential, Proprietary, and Customer Information or Documents
• Rules against Defamation or Misrepresentation
• Rules against Using Employer Logos or Intellectual Property
• Rules Requiring Authorization to Speak for Company
• Rules Banning Disloyalty, Nepotism, or Self-Enrichment

Other rules would require more individualized scrutiny based on the context, such as:

• Broad conflict-of-interest rules
• Confidentiality rules encompassing “employer business” or “employee information”
• Rules regarding disparagement or criticism of the employer
• Restrictions on use of the employer’s name
• Rules restricting speaking to the media or third parties
• Bans on off-duty conduct that might harm the employer
• Rules against making false or inaccurate statements

New, More Restrictive Standard

In the Biden administration, the NLRB shifted to a pro-labor, Democratic majority. This shift has recently culminated in a litany of reversals of Board policy. In a case involving Stericycle, Inc., the NLRB adopted “a new legal standard to decide whether an employer’s work rule that does not expressly restrict employees’ protected concerted activity under Section 7” violates the NLRA.

In other words, the NLRB has changed the standard that presumably applies to all of the bulleted categories of employer work rules above. According to the current Board majority, they have devised a new standard that “builds on and revises” a test introduced through a 2004 case (which had been since reversed during the Trump administration).

The Board majority began with the premise and assertion that “the current standard fails to account for the economic dependency of employees on their employers.” Because of that dependence, the NLRB now places the burden squarely on the employer to ensure that no employee would reasonably interpret any rule as preventing them from doing anything that might be protected activity under Section 7.

In its words, the Board initially requires proof “that a challenged rule has a reasonable tendency to chill employees from exercising their Section 7 rights.” To reiterate the employee-centric nature of that inquiry, 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.”

To rebut the presumption that a rule is unlawful, the employer must now prove “that it advances legitimate and substantial business interests that cannot be achieved by a more narrowly tailored rule.”

Impact of New Standard on Old Rules

The NLRB’s August 2, 2023, decision confirms that the new standard applies even to pre-existing employer work rules. The new standard will likely be challenged in the courts. Yet, for now at least, employers who ignore it do so at the risk of NLRB prosecution. Granted, most employee handbooks aren’t the subject of unfair labor practice charges at the NLRB, even if they contain questionable and now potentially unlawful policies. However, there are certain scenarios where legal scrutiny becomes more likely.

Unions seeking to represent an employer’s workforce commonly review employee handbooks, work rules, and policy manuals. If they find anything that could violate the NLRA, they may bring charges as part of their organizing campaign.

In addition, maintaining potentially unlawful policies becomes problematic when attempting to discipline an employee for violating one of them. In that case, the employee may be motivated to go to the NLRB to challenge the discipline imposed, especially in the case of termination. In addition to other potentially costly remedies, the NLRB  has the authority to reinstate employees fired for unlawful reasons.

Review Your Policies

The NLRB is creating something of a revolving door for employee handbooks. If your current work rules were written in the past few years under the then-prevailing NLRB standards, they may contain policies that the Board would now consider unlawful. On the other hand, if your relevant policies were cautiously drafted or revised during the Obama administration, they may still be acceptable to the NLRB.

In any event, all private employers (the NLRB doesn’t have jurisdiction over most government entities) should consider evaluating their policy manuals under the new standard. There is, perhaps, even more urgency if you’re in an industry or scenario where you feel at risk for future unionization or have policies you commonly rely on for discipline that might fall into the categories listed above.

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