New standard for legality of employer policies

August 12, 2023

Earlier this month, the National Labor Relations Board announced that it had adopted a new standard for evaluating the lawfulness of certain work rules. In its 3-to-1 decision, the board overruled long-standing standards for evaluating the legality of employer policies, and adopted a new legal standard for policies that are challenged as unlawful under Section 8(a)(1) of the National Labor Relations Act.

Many employers have questioned what this means about their own employment policies and whether this impacts them.

The National Labor Relations Act applies to most private employers, but not public sector employers (state, federal or local governments). It also generally applies only to non-management employees.

Even private employers without existing unions must comply with the NLRA’s requirements.

Covered employees have a right to engage in conduct under Section 7 of the act, to include the “right to self-organization, to form, join, or assist labor organizations, to bargain collectively… and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

Section 8(a)(1) of the NLRA makes it an unfair labor practice for an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7” of the act.

Work rules and policies come into play when employees allege that a policy or work rule of their employer restricted their right to engage in Section 7 activities, even if not plainly stated in the policy.

For example, a policy that prohibits covered employees from discussing wages would violate Section 8(a)(1) because by prohibiting employees from discussing wages, the employees cannot engage in concerted activity to bargain for better wages. Of note, many state laws, including Virginia, prohibit such a policy as well.

In the matter before the board, policies in question included those around personal conduct, conflicts of interest, prohibitions on recordings in the workplace, and confidentiality of harassment complaints.

According to the case and the board’s announcement, under the new standard, the general counsel of the NLRB must only “prove that a challenged rule has a reasonable tendency to chill employees from exercising their rights. If the general counsel does so, then the rule is presumptively unlawful. However, the employer may rebut the presumption by proving that the rule advances a legitimate and substantial business interest and that the employer is unable to advance that interest with a more narrowly tailored rule. If the employer proves its defense, then the work rule will be found lawful to maintain.”

The new standard adopts a “case-specific consideration of work rules.”

The ruling is troubling for employers who are trying to protect company information, and promote a civil and respectful workplace with specific policies that address those concerns.

The ruling has been widely criticized because it creates confusion for employers as it is now at least the fourth iteration of board policy on this matter over the years, and because it is retroactive, which makes it extremely concerning for employers. Others acknowledge that policies change with different administrations, and this one is widely known as employee-centric.

In the sole dissenting opinion, the board member explained the difficulty for employers to comply with the new rule, including an example of a rule stating that employees can be disciplined for their “inability or unwillingness to work harmoniously with other employees,” which the board member said would be presumptively unlawful under the new standard.

The dissenting board member stated, “Because it is unlikely that findings of presumptive unlawfulness can be overcome, employers’ only real hope is to avoid that finding in the first place. And because it is virtually impossible to craft work rules that are general enough to serve their intended lawful purpose without being susceptible to an interpretation that infringes on Section 7 rights, the only reliably predictable way that employers might insulate their work rules from board invalidation would be by adding a legally sufficient disclaimer to their employee handbooks, i.e., language that would reassure even the majority’s hypervigilant ‘reasonable employee’ that none of the rules contained therein applies to Section 7 activity.”

The dissenting member also criticized the retroactive nature of the opinion, stating that the new board under this current administration is taking an approach of rarely seeing a challenged rule it did not find unlawful.

Experts have taken varying approaches: some recommending that employers immediately change their policies and others taking a wait-and-see approach since the decision will surely be appealed and possibly reversed.

I recommend that employers take a middle ground and make sure that they have the safe harbor language in their policies, and also review their policies from what the board held is a “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.”

Employers should make sure that they can articulate a legitimate business purpose for the rules, and that no other more narrowly tailored rule would be similarly effective to enforce the business need.

They should also include disclaimer language in the policies/handbook, but it is unclear how much protection this will provide to employers.