Over the last two years, the National Labor Relations Board (“NLRB”) has been aggressively trying to expand its coverage in a manner that has taken many employers of non-unionized employees by surprise. Many rules and concepts that have been in place for decades without challenge have been turned on their heads and are now construed to be illegal. One example is a decision by the NLRB earlier this year in McLaren Macomb ruling that common confidentiality and non-disparagement provisions in settlement and separation agreements are illegal, as a matter of law, because they could – at least theoretically – chill a worker’s right to engage in concerted activity protected under the National Labor Relations Act (“NLRA”). The takeaway from these actions by the NLRB and its General Counsel is that all policies and practices of every employer – unionized and non-unionized – will be scrutinized under the NLRB’s new highly powered microscope. In other words, employers watch out!
This trend is all the more apparent by the NLRB’s decision issued August 1 in Stericyle Inc. in which it set a new legal standard for evaluating the legality of employer work rules. This new standard reverses decisions reached by the NLRB under the Trump Administration, and basically revives a short-lived novel standard first announced by the NLRB during the Obama Administration.
The hook being used to hold that rules and contracts are illegal in all of these cases is that they are contrary to the right virtually all non-supervisory private sector employees have under NLRA, that is the right to “engage in concerted activity for the purpose of mutual aid or protection.” The new standard evaluates whether a reasonable worker who is “economically dependent on the employer” would interpret a rule to prohibit union organizing or engaging in concerted activity. The new Stericycle standard applies to all work rules and employee handbooks in both unionized and non-unionized workplaces in the private sector since even non-unionized employees are protected under the NLRA if they engage in activity that could be deemed concerted for the purpose of addressing workplace issues. The Board’s rationale for the new standard was that employees who depend on their employer for their paychecks are likely to be more cautious about violating a rule and as a result, would interpret it more broadly than a neutral third party might.
Under NLRB precedent, a work rule is unlawful when the rule has a reasonable tendency to “chill” an employee’s exercise of their rights under the NLRA. With the new standard set forth in Stericycle, if an economically dependent employee could reasonably interpret the rule to restrict or prohibit concerted activity protected under the Act— even if a different, reasonable and lawful interpretation is possible—the rule is presumptively unlawful and invalid. The employer’s business reason for adopting the rule, for example, safety or protection of confidential information, esprit de corps, etc., does not matter. If the rule is found to be presumptively unlawful, the employer’s only defense would be to prove that the business reason could not be accomplished by a more narrowly tailored rule. This is a low threshold for the NLRB to meet and a high threshold for employer’s to prove to overcome the NLRB’s claim.
In light of the above, if presented with an employer’s handbook, policy, or contract, the NLRB will likely find some basic provision is too broad and thereby illegal. These disputes will result in costly litigation, and even if settled, the NLRB will still insist on posters and email blasts to employees stating that the employer violated their rights to engage in concerted activity.
To mitigate against being caught in the NLRB’s crosshairs on this issue, employers should review their employee handbooks, policies, procedures, employment agreements and other workplace rules to ensure they are narrowly tailored in order to avoid having them construed as even theoretically chilling protected concerted activity. Common policies of concern include typical discipline and work rules (e.g., rules proscribing insubordination are too vague, according to the NLRB), rules proscribing tape recording or taking photos in the workplace, general rules protecting confidential information, and rules regarding social media postings and use of company email systems. Separation and severance, and even employment and non-compete/non-solicitation agreements should also be reviewed.