United States: NLRB Reverses Course On Standard For Evaluating Employee Handbook Rules

Published in NH Society of CPA's Connections Newsletter 9/27/2018

On December 14, 2017, the National Labor Relations Board (Board) discarded its longstanding and employee-friendly approach to determining whether a facially neutral employer rule or policy unlawfully interferes with an employee’s right to engage in protected concerted activity under Section 7 of the National Labor Relations Act (NLRA).  

In a 3-2 decision split along party lines, the Board held in Boeing Company, 365 NLRB No. 154 (Dec 14, 2017), that it will now evaluate the validity of employer policies and rules by examining (a) “the nature and extent of the potential impact on NLRA rights,” and (b) “legitimate justifications associated with the rule.” 

This decision overrules the 13-year-old standard established in Lutheran Heritage, 343 NLRB 646 (2004), under which the Board deemed facially neutral employer rules unlawful if an employee would “reasonably construe” the rule as prohibiting Section 7 activity, and follows the NLRB General Counsel’s December 1 decision to withdraw a 2015 memorandum (GC 15-04) concerning the validity of common employer handbook rules.

In the decision below, the Administrative Law Judge had applied the Lutheran Heritage standard to invalidate Boeing’s ban on camera-enabled devices on its property. The majority held this decision “expose[d] fundamental problems” with the Board’s past approach to evaluating employer rules and policies. Cribbing from (now-former) Chairman Philip Miscimarra’s dissent in William Beaumont Hospital, 363 No. 162 (2016), the majority described these difficulties as follows:

  • The Lutheran Heritage standard provides for “single-minded consideration of NLRA-protected rights” without appropriate consideration to the legitimacy of the employer’s interest in the rule.
  • The standard promotes the notion that the absence of employer handbooks and policies is preferable to establishing clear guidelines for employee behavior, unless those guidelines “anticipate and carve out every possible overlap with NLRA coverage.”
  • The standard equates an ambiguous rule with an unlawful rule, thereby setting to employers the impossible task of removing all ambiguities from policies that “conceivably touch on some type of Section 7 activity.”
  • The standard provides the Board no discretion to distinguish “periphery” Section 7 activities from those “that are central to the Act.”
  • The standard fails to consider differences between particular industries, events, and work settings.
  • The standard is impossible to apply consistently, resulting in employer/employee uncertainty and increased litigation.

Moving forward, the Board held, it will balance the employer’s justification for the rule against the impact on NLRA rights, and assign employer rules to one of three “categories” of increasing severity. The goal of this approach will be to “provide far greater clarity and certainty to employees, employers, and unions regarding whether and to what extent different types of rules may lawfully be maintained.”

The categories are as follows:

  •  Category 1 (Lawful): “[R]ules that the Board designates as lawful to maintain, either because (i) the rule, when reasonably interpreted, does not prohibit or interfere with the exercise of NLRA rights; or (ii) the potential adverse impact on protected rights is outweighed by justifications associated with the rule.” The Board stated that this category would include no-camera rules and rules that require employees to “maintain basic standards of civility” or to foster “harmonious interactions,” and that past cases to the contrary were overruled. (See slip op. at 4, n. 15.) The Board cautioned, however, that the application of a “Category 1” rule may still violate the Act if the employer uses the rule to suppress NLRA-protected activity.
  • Category 2: “[R]ules that warrant individualized scrutiny in each case as to whether the rule would prohibit or interfere with NLRA rights, and if so, whether any adverse impact on NLRA-protected conduct is outweighed by legitimate justifications.” 
  • Category 3 (Unlawful): “[R]ules that the Board will designate as unlawful to maintain because they would prohibit or limit NLRA-protected conduct, and [because] the adverse impact on NLRA rights is not outweighed by justifications associated with the rule.” A rule prohibiting employees from discussing wages or benefits with one another would fall under this category.

The Board also held that, in applying the new standard, it may (a) differentiate among “central” and “peripheral” NLRA rights; (b) distinguish “substantial [employer] justifications” from those of “peripheral importance”; (c) distinguish between different industries or work settings; and (d) take into account “particular events that may shed light” on the purpose of a rule or the impact on protected rights.

Applying the new framework to Boeing’s no-camera rule, the Board found that while the rule “may potentially affect the exercise of Section 7 rights,” the adverse impact was “comparatively slight” and outweighed by substantial justifications. Those justifications included Boeing’s need to comply with certain security protocols as a federal contractor; its federal duty to prevent the disclosure of export-controlled equipment, software, technology; its interest in preventing disclosure of its proprietary information and of employees’ personally identifying information; and the risk that uncontrolled photography at its facilities could increase the risk of a terrorist attack.   

Although the no-camera rule might prevent employees from photographing Section 7 activity on Boeing’s premises, the Board found, it would not prevent the employees from actually engaging in Section 7 activity, and Boeing’s substantial and important interests in maintaining the rule justified the minor limit on employee’s Section 7 rights.

The dissent strongly criticized the majority’s decision, noting that the parties had not raised the issue of Lutheran Heritage’s continuing validity, nor had the Board invited interested amici to comment on whether it should overrule that decision. Member Mark Gaston Pearce called the decision a “how-to manual for employers intent on stifling protected concerted activity before it begins.” Member Lauren McFerran denounced the majority’s actions as agency rulemaking by a newly-constituted Board majority.

The Board’s decision applies retroactively to all pending cases. Chairman Miscimarra’s term expired December 16, 2017, leaving the Board temporarily split between Democrats and Republicans until another nominee is appointed and confirmed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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