Episode 183: How a Recent National Labor Relations Board Ruling Affects Workplace Rules, Employee Handbooks

Welcome to the Workplace, a podcast by Cal Chamber. I'm Matthew Roberts, the Labor Law helpline manager and Employment Law council with the California Chamber of Commerce. Welcome back, listeners. In today's episode, we are going to dive into a recent National Labor Relations Board ruling that appears to impact nearly all California employees through our employee handbooks. And yes, yes, I know, I know many of us are not union shops or have collective bargaining agreements with our workforce. So why should we care what the NLRB says? Well, before you turn me off, this is because the National Labor Relations act, that law that allows employees to engage in collective action to improve wages, hours and other working conditions, applies to nearly every employer, whether unionized or not. So to discuss how the NLRB has changed the game with respect to employee handbook rules, we welcome back Cal Chambers legal editor and employment law subject matter expert James Ward. Thanks for joining me today. James.

Thanks for having me. Great to be here.

It's great to have you. For what will be what I think a kind of fascinating discussion here. But first, before we get into it, I think it will help this discussion if we first just talk about what the NLRB is and its function. I know a lot of employers are not really that familiar with what the NLRB is, and so it'll be some good background for us to talk about what it is and how it works.

Sure. So the NLRB is a five member board with members that are appointed by the President of the United States with consent of the Senate. The board is responsible for enforcing the National Labor Relations act specifically related to unfair labor claims that can arise during collective bargaining activities or in workplace rules that allegedly infringe on NLRA rights. The president also appoints the general counsel, who works like a prosecutor in unfair labor claims before the board.

So I find it interesting then that the National Labor Relations Board calls itself this independent agency, but is formed by the administration that's in power right now. So, you know, in this case, we have President Biden going on and he has over the course of his presidency, nominated members to the board. President Trump before him did that as well. And every president on down the line since we've had the board and the idea that this board is formed by nominations from the administration in power kind of sets the stage for what we're going to talk about. Right. And how the board flip flops often.

Yes, absolutely. Because of how the board's appointed, party affiliations on the board frequently match the party in power and it changes as each administration changes. It's important to note that it's not the law that's changing here. It's the interpretation of the law based on who's on the board right now. So this results in decisions that are overturning prior decisions, and then later decisions overturn the decisions that overturn the prior decisions. We get this kind of overall inconsistency in how the board enforces the rules. And we see this kind of thing in courts as well. We always watch Supreme Court nominations very closely and talk about how that's going to play out. But it happens much quicker with the board because the members have five year term limits. So they're always kind of in and out.

Yeah. Awesome. That already has my head spinning. So, with that background in mind, let's get to the case at hand that's kind of upended how we are going to be drafting our employee handbook policies, at least some of them going forward into the near future future.

This case, known as the Stericycle case, was before the nlrb and as you and I kind of talked about before the show, it's been around really for some years. So what was the factual issues in this case before the nlrb?

Yeah, as you mentioned, the case actually started back in 2014. The initial charge had a number of issues that the union was bringing before the board. Among them was the workplace rules that they were challenging. They alleged that these rules that the employer was imposing on them chilled employees, collected bargaining rights under the nlra.

And some of those policies that I think we saw were things like personal conduct policies, conflicts of interest policies. There was one really interesting one about a requirement to keep harassment complaints confidential. And these three policies were there at issue. So we're talking about really policies that many employers already have in their handbook.

With that setting the stage factually, it seems, for the nlrb, their job in this case was evaluating how these workplace rules impact an employee's rights under the nlra.

Right? Yeah. So the main issue underlying this case and the others that we'll talk about in a minute is striking this balance between the employee's rights under the NLRA and the employer's rights to maintain certain workplace rules that support their legitimate business interests and also keep civility in the workplace, that type of thing. So when these tests change over time, what's typically happening is we're seeing a shift in the weight that's given to either the employee's rights or the employer's interests. So to maybe understand the new rule and kind of where we're at, we can briefly recap where we've been recently. The board Itself kind of cites back to a 2004 decision called the Lutheran Heritage Decision, and that said that a workplace rule violates the NLRA if the employee would, quote, reasonably construe the language to prohibit protected activities. This is obviously a very broad standard. It's centered on the employee's interpretation of a rule. But the board at the time didn't really consider the employer's justifications for the rule or the extent to which it might restrict protected activity. So there's some decisions that were decided after that case. And then in 2017, we get the board reversing course in what's called the Boeing decision. This created a sort of a categorical framework for analyzing these workplace rules. And it considered both the impact of the rules on the employee's rights and the employer's justification. So it's kind of striking a different balance there. And I'll just very briefly, there's three categories. This is what employers have been operating under for the last several years. The first category were sort of rules that the board always thought was lawful, either because they didn't impact rights or the impact was outweighed by the business justification. So in this category, we might get things like civility rules, no disparagement of other employees in the workplace, things like no recording, no photography, those types of things. In the second category, we get rules that might warrant individual scrutiny in each case, whether they interfered with rights, and if so, whether the impact was outweighed by the business justification. So in that category we get things like confidentiality rules, conflict of interest rules, and certain off duty conduct rules. And then in the third category, the board put rules that were just unlawful just from the start. So, you know, rules that prohibited discussing wages, benefits, that type of thing, just automatically unlawful.

Yeah. And just off that Boeing standard, what I found was really interesting is, you know, employers got this decision and they now had this ability to kind of redraft their handbooks. And I remember back in 2017 when the case came out, a lot of employers wanted us to review handbooks and, you know, see where we can make these updates. And then they've been operating with this for the last several years, as you said. And now we get to the staircycle case that's going to kind of undo everything that we just had with Boeing, right, James?

Yeah. So under Boeing, we could look at some of these old decisions. And if it was a category one workplace rule, employers would be like, okay, that one's safe, we know that's lawful. We have these interests that justify the rule. Now the board is saying that's not the case. They actually dumped the Boeing standard and the whole categorical framework. Everything is case by case now, and they change the whole test. So in the eyes of the current board, Boeing gave too little consideration, they said, to the chilling effect that these rules can have on workers rights. Under the new standard, an employer rule is presumptively invalid if the general Counsel can show that the rule has a reasonable tendency to chill employees from exercising their rights. This is going back to that Lutheran heritage language that reasonably construe or has a reasonable tendency.

This new standard sets a very low bar because the board said its interpretation of a rule will be from the context of an employee who is dependent on the employer and who is also contemplating engaging in protected activity. So this is a unique perspective to take. This might not be what an employer would think of as, say, an average reasonable employee, especially if they don't have a unionized workforce. But from the board's perspective, this employee is going to be thinking about engaging in activity, and it's going to be thinking about whether this rule has a coercive effect on their ability to do that. So the board said, consistent with this perspective, the employer's intent in maintaining the rule is immaterial. And they said, rather, if an employee could reasonably interpret the rule to have a coercive meaning, the rule is presumed unlawful, even if there's another non coercive interpretation that's reasonable. Here's the punchline here. This means that an ambiguous rule or an overbroad one will always be found to be unlawful. And once that bar is met, the employer, you know, the board says they're going to look at business interests unlike the Lutheran standard. So they say, employer has the opportunity to rebut the presumption by showing that it has, quote, legitimate and substantial business interest and that it could not accomplish that interest with a more narrow rule. But this last part is very difficult for employers because once the rule is shown to be ambiguous or overbroad in the first step, it's going to be incredibly difficult to show that the rule is narrow enough.

Yeah, kind of a tough test. And I love the academics of this, but what I think I found with the members and those who attended webinar that I did this morning about this very issue as well, is they're like, okay, so what does that mean for a lot of these policies that I have? How does this practically apply? Because, you know, let's start with required policies in our handbook. We know in California that we have to have certain policies like harassment, discrimination and retaliation prevention policy under the Fair Employment and Housing Act. We need to have lactation accommodation policy under the Labor Code. In many cases, we need to have family and medical leave policies, maybe both the federal and the state standards, depending on our employer size. So because the law requires these, are they going to be subject to this new rule.

Such that we have to kind of reevaluate these legally required policies that we have?

Probably not.

As long as the policies are narrowly tailored to the requirements. So as you mentioned, Stericycle's harassment complaint confidentiality policy was a problem in this case, but it was a problem because the policy directed all parties involved to keep the information confidential to the fullest extent possible. So it's placing restrictions on individuals, employees that are involved in the investigation, not simply on, say, the employer. If the employer is saying the employer is going to keep it confidential to the extent possible, that's a different thing.

And employers probably will want to at least take a look at these policies and just ensure that they are narrowly tailored to the requirements of the law, but they will likely be permissible under this new test.

Okay, so then in addition to the legally required policies, there are very few of them. Employers have many other policies in their handbooks to help guide employees on workplace rules. You know, we'll have things about when do you get holiday pay? Or what's your vacation accrual? Or how will we enforce our rest and meal break policy for non exempt. But there's also other kinds of policies just about how things work at the workplace and how we expect employees to behave at the workplace. So, James, what kinds of common policies that we have seen are at risk under this new standard?

So I think that there are many. The common policies that could be at risk, essentially any policy that puts some kind of restriction on employee speech, communication conduct. So think codes of conduct policies, electronic communications, confidential information policies that restrict what employees are allowed to disclose, social media policies and employer use. All those kinds of things are going to need to be reexamined under this new standard.

Okay, so I like the codes of conduct 1 because this was something that came up and I know this is a case we actually did have earlier in the year about the nlrb, which is what level of kind of inappropriate, lewd, profane conduct can employees engage in at the workplace that's still protected on the nlra Because a lot of us as employers have codes of conduct. We expect employees to maintain professionalism. We don't expect them to just drop F bombs left and Right at people use ludicrous comments. Of course, we have harassment issues with that. So let's take a company's code of conduct policies. What should an employer look for when they are devising or revising this kind of policy and potentially change specifically in that policy to avoid these NLRA issues?

Yeah, it's a great question. So, like you said, these policies include all sorts of conduct and rules for the workplace. You know, basic things like, you know, don't steal company property, you know, don't falsify information. But also some of these more broader restrictions on, say, causing disruptions in the workplace or making offensive comments, like you said, that kind of thing. All these types of broad restrictions could be at risk. Let's say I'm the board's reasonable employee. I'm looking to engage in protected activity. I want to have a potentially heated discussion with coworkers or management about some working condition. Would that cause a quote, unquote, disruption under the board's new standard? I would say yes. That's. That's a problem. Employers need to look at those types of policies and be much more specific about the exact type of conduct they want to prohibit. Instead of saying a word like disruption, look at prohibiting, say, physical altercations in the workplace. Because there's workplace safety issues with that. Obviously you want to prohibit abusive language, threats, workplace bullying, conduct, like you said, that maybe constitutes harassment under federal, state or local law. And there may be some situations where more restrictive policies make sense, but that's going to depend on the workplace. It's going to depend on the employer's substantial and legitimate interests. Workplaces like, let's say, emergency rooms, manufacturing areas, where there's very significant workplace safety issues, might warrant more restrictive policies. But employers are going to have to look at those very carefully with their legal counsel. They're going to have to make sure they narrowly tailor those rules and thoroughly tie them to the legitimate and substantial business interests that they're putting forward.

Yeah, and I like to close with always those who have listened before. This phrase that I use, so what? Right. So we've talked about this. Maybe the reasonable employee doesn't really contemplate engaging in concerted activity under the National Labor Relations act, even though the board does. And, you know, if we don't end up changing our policies, you know, so what? And the so what really here is that the nlrb, as part of their adjudicatory powers with the nlra, can do things the same thing courts can do with wrongful termination. So let's say, you know, we'll take a code of conduct policy that you have about disruptions, and somebody gets into a heated discussion with another coworker against management about a workplace safety issue, and it's heated and it's loud and it's disruptive. And you said, you know what? That was disruptive. You were acting insubordinate towards your supervisor. We're going to fire you, and you let them go. Well, if your policy is violating the nlra, now, under this new standard, the NLRB has this power to put them back to work, give them back, pay all these damages, just like you would see in the courts. And because of how loose the standard is, James, I think you and I would agree that this could be now a more potent avenue for attorneys to bring cases on behalf of their employees than it used to be in the past because of how easy the standard is to say, look, your policy violated it. This is not legitimate. You violated the nlra. You got to put my guy, my employee back. Right, James?

Yes, absolutely. I agree.

All right, James. Well, this was a wonderful discussion. I think, to get employers up to date on current policy requirements. As you said there at the end, please make sure you work with legal counsel. Please make sure you're working with really good employee handbook creation tools. I know Cal Chamber has one as well that we will be updating, James, to kind of reflect what Stericycle did here in this case. James, thank you very much for joining me today.

Thanks for having me. It was great.

And thank you, listeners, for joining this discussion on the workplace. Please comment, share and subscribe to Cal Chamber's podcast by visiting calchamber.com.