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Divided NLRB adopts new standard for when neutral workplace policies violate employee rights

By Kathleen Kapusta, J.D. and Lisa Milam-Perez, J.D.

In a 3-2 decision, the NLRB overruled its Lutheran Heritage Village-Livonia standard governing whether facially neutral workplace rules, policies, and employee handbook provisions unlawfully interfere with the exercise of rights protected by the NLRA. In place of the Lutheran Heritage “reasonably construe” standard, the Board established a new test: When evaluating a facially neutral policy, rule, or handbook provision that, when reasonably interpreted, would potentially interfere with the exercise of NLRA rights, the Board will consider two things: (1) the nature and extent of the potential impact on NLRA rights; and (2) legitimate justifications associated with the rule. The Board also delineated three categories of rules, going forward, that it said will provide greater clarity and certainty to employees, employers, and unions. Applying this new standard, the majority held that Boeing lawfully maintained a no-camera rule that prohibited employees from using camera-enabled devices to capture images or video without a valid business need and an approved camera permit. The rule potentially affected the exercise of NLRA rights, but the impact was comparatively slight and outweighed by important justifications, including national security concerns, the majority reasoned. Members Pearce and McFerran dissented (The Boeing Co., December 14, 2017).

Under Lutheran Heritage, in place since 2004, employers violate the Act by maintaining workplace rules that do not explicitly prohibit protected activities, were not adopted in response to such activities, and were not applied to restrict such activities, if the rules would be “reasonably construed” by an employee to prohibit the exercise of NLRA rights. Applying that standard, an administrative law judge found that Boeing’s maintenance of its no-camera rule violated NLRA Section 8(a)(1) because employees would reasonably construe the rule to prohibit Section 7 activity. In so finding, the Board majority noted, the judge gave no weight to the security needs of Boeing—which designs and manufactures military and commercial aircraft at various facilities throughout the United States—for the rule.

Fundamental problems. The judge’s decision, the majority observed, exposed fundamental problems with the Board’s application of Lutheran Heritage. In the majority’s view, multiple defects are inherent in the Lutheran Heritage test, including that the “reasonably construe” standard entails a “single-minded consideration of the NLRA-protected rights, without taking into account any legitimate justifications associated with policies, rules and handbook provisions.” This, the majority stated, was contrary to Supreme Court precedent and the Board’s own cases. The standard also defied all reasonable efforts to make it yield predictable results, creating enormous challenges for the Board and courts, and immense uncertainty and litigation for employees, unions, and employers, the majority declared, noting that “over the past decade the Board has invalidated a large number of common-sense rules and requirements that most people would reasonably expect every employer to maintain.”

Three categories. In adopting the new standard, the majority emphasized that the Board will evaluate the policy, rule, or provision at issue with a “duty to strike the proper balance between . . . asserted business justifications and the invasion of employee rights in light of the Act and its policy.” The Board will also delineate three categories of policies, rules, and handbook provisions. Category 1 will include rules 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. Rules in this category include the no-camera requirements in this case and rules requiring employees to abide by basic standards of civility.

Category 2 includes rules 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 includes rules the Board will designate as unlawful to maintain because they would prohibit or limit NLRA-protected conduct, and the adverse impact on NLRA rights is not outweighed by justifications associated with the rule, such as a rule that prohibits employees from discussing wages or benefits with one another. These categories, the Board stressed, represent a classification of results from the Board’s application of the new test and are not part of the test itself.

Further, said the majority, the Board may differentiate among different types of NLRA-protected activities and must recognize those instances where the risk of intruding on NLRA rights is “comparatively slight.” When a facially neutral rule, reasonably interpreted, would not prohibit or interfere with the exercise of NLRA rights, maintenance of the rule is lawful without any need to evaluate or balance business justifications, and the Board’s inquiry into maintenance of the rule comes to an end. Conversely, when a rule, reasonably interpreted, would prohibit or interfere with the exercise of NLRA rights, the mere existence of some plausible business justification will not automatically render the rule lawful. And when the Board interprets any rule’s impact on employees, the focus should rightfully be on the employees’ perspective.

Further, the majority explained, the Board may find that an employer may lawfully maintain a particular rule, notwithstanding some possible impact on a type of protected Section 7 activity, even though the rule cannot lawfully be applied against employees who engage in NLRA-protected conduct. As an example, the majority observed that if the Board finds an employer lawfully maintained a “courtesy and respect” rule, but the employer invokes the rule when imposing discipline on employees who engage in a work-related dispute that is protected by Section 7 of the Act, it may find that the discipline constituted unlawful interference with the exercise of protected rights in violation of Section 8(a)(1).

Retroactive effect. Finally, the majority found it appropriate to apply the standard retroactively to the instant case and all other pending cases, noting that “all parties will benefit from Board decisions that take into account not only whether a work rule, when reasonably interpreted, would prohibit or interfere with the exercise of Section 7 rights, but also any justifications associated with the rule and whether or not such justifications are outweighed by the rule’s adverse impact on protected rights.”

Application of rule. In applying the standard to this case, the majority found that the rule in some circumstances might potentially affect the exercise of Section 7 rights but the adverse impact was outweighed by substantial and important justifications. Specifically, the rule is an integral component of Boeing’s security protocol; it plays a key role in ensuring that Boeing complies with its federally mandated duty to prevent disclosure of export-controlled information or the exposure of export-controlled materials to unauthorized persons; it helps prevent the disclosure of Boeing’s proprietary information; it limits the risk that employees’ personally identifiable information will be released; and it limits the risk of Boeing becoming a target of terrorist attacks. Thus, Boeing’s maintenance of the rule did not constitute unlawful interference with protected rights in violation of Section 8(a)(1).

Pearce dissent. Member Pearce, dissenting, pointed out that in the 13 years since it was adopted, the Lutheran Heritage standard has been upheld by every court to consider it. Further, he observed, no party in this case asked the Board to overrule Lutheran Heritage or apply a different standard. He contended that the new standard, which he characterized as “essentially a how-to manual for employers intent on stifling protected concerted activity before it begins,” is an “incomprehensible hodgepodge of factors that will be impossible to apply.” And, in agreement with Member McFerran, he argued that “before the Board abandons or modifies a decade old standard, without prompting by adverse court precedent or any party to this case, it should notify the public and parties that a reversal of important precedent is under consideration, solicit the informed views of affected stakeholders in industry and labor, and allow the parties to introduce evidence under the new standard.”

Particularly troubling, in Member Pearce’s view, was the majority’s designation of rules “requiring employees to abide by basic standards of civility” as always lawful to maintain (Category 1) as no civility rules were involved in this case. By declaring civility rules always lawful, he argued, the majority went far beyond the issue presented here and “essentially provides an advisory opinion.” Noting that it is well established the Board does not give advisory opinions except on narrow jurisdictional questions, he asserted that this “is no more than ‘seat-of-the-pants’ rulemaking without context.” Moreover, he pointed out, the fear of reprisal instilled in employees by overbroad civility rules is well founded and the cases in which employers have applied such rules to discipline or discharge employees for engaging in protected concerted activity are numerous.

McFerran dissent. In a separate lengthy dissent, Member McFerran also pointed out that no court has ever rejected the Lutheran Heritage test. While she was not surprised that a newly constituted majority would revisit precedent, she did find surprising “the arbitrary and capricious process the majority has followed in its rush to replace the current test and the alarmingly flawed result of that process.”

Like Member Pearce, she pointed out that no party or participant in this case—which involved a single, no-photography rule—asked the Board to overrule Lutheran Heritage. Moreover, she stated, over the minority’s objection, the majority refused to notify the public that it was contemplating a break with established precedent and refused to invite amicus briefing from interested persons, even though this had become the Board’s norm in the years following Lutheran Heritage. “Without the benefit of briefs from the parties or the public, the majority invents a comprehensive new approach to work rules that goes far beyond any issue presented in this case and, indeed, beyond the scope of Lutheran Heritage itself,” she asserted, declaring that this “is secret rulemaking in the guise of adjudication, an abuse of the administrative process that leaves Board law not better, but demonstrably worse” as the majority “devised a new test that is more complicated, more unpredictable, and much less protective of the statutory rights of employees than the standard it replaces.”

Further, she argued, the majority effectively abandoned the key premise of Lutheran Heritage: that for purposes of administering the NLRA, an employer’s work rules should be evaluated from the perspective of the employees subject to the rules—and protected by the statute. Noting that the majority emphasized the Board would conduct this evaluation, Member McFerran observed that “what the majority means is quite clear: going forward, the Board’s primary focus will not be on the potential chilling effect of work rules on employees, but rather on the interests of employers in imposing rules on their employees. This new focus—a sharp break from the Board’s long-established approach—is unreasonable.”

This decision, she predicted, “will be a Pyrrhic victory at best for the majority. The majority establishes a new standard that is worse, not better, than the old standard, burdening the Board and the public with more uncertainty and even less clarity. Mess ipsa loquitur. And the Board’s rush to an ill-considered judgment will do real damage to the Board’s institutional reputation – and, if not corrected by a reviewing court, to the fair administration of the National Labor Relations Act, and to the statutory rights of American workers.”