Battle of the boards: Revolution or evolution? The labor board's changing guidance on work rules in union and non-union workplaces

Brian J. Christensen[1] and Austin O. Jaspers[2]

The winds of change are blowing at the National Labor Relations Board (NLRB) and they bring with them changes that favor employers. On June 6, 2018, the Office of the General Counsel of the NLRB issued a directive superseding guidance on employer rules of conduct issued three years prior.[3] General Counsel Peter Robb’s memorandum follows the NLRB’s recent Boeing[4] decision, which modified the legal standard against which the validity of employer work rules are measured.[5]  

The consequences of these shifting standards are significant for both employees and employers. Consider the following example: an employee brings a cellular phone to the workplace and takes video of work processes, co-workers, and supervisors. The employee’s reason for creating the video was to document alleged safety violations at the plant. The employer learns of this and, in accordance with its work rules, discharges the employee. The employee files a charge with the NLRB alleging the discharge and the associated work rules violate his rights under the National Labor Relations Act. The employee seeks reinstatement with back pay. Before the recent Boeing decision, the employee might well have prevailed. Post-Boeing, likely he would not.

The Law Pre-Boeing – Lutheran Heritage-Livonia

The NLRB established its standard for evaluating employer work rules against the requirements of the National Labor Relations Act 13 years prior to the Boeing decision in Lutheran Heritage-Livonia.[6] This case arose from a dispute over an employee’s allegation that various employer work rules violated the act by infringing on employees’ rights under Section 7 of the act.[7] Section 7 prohibits the maintenance of “a work rule that reasonably tends to chill employees in the exercise of their Section 7 rights.”[8] Section 7 of the act guarantees employees the right to engage in concerted activities for their mutual aid or protection and applies to both union and non-union employers.

In Lutheran Heritage-Livonia, the complaining employee argued that his employer maintained work rules that unlawfully chilled his exercise of Section 7 rights.[9] Siding with the employee, the NLRB decided three of the employer’s six work rules violated the act. In doing so, the NLRB established a three-prong test to determine whether work rules violated the act by chilling employees’ exercise of their Section 7 rights.[10] This test became known as the “Lutheran Heritage test.”[11]

In its decision, the Lutheran Heritage board held that a work rule violates the act if any of the following exist: “(1) employees would reasonably construe the language to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of Section 7 rights.”[12]Significantly, this test did not require actual enforcement of the work rules at issue for a violation to occur. Rather, merely maintaining a work rule that ran afoul of any of these three prongs would result in a finding that the employer violated the act, even if the rule had never been enforced.[13]

Employers generally found prongs two and three to be relatively straightforward to apply. However, the first prong caused a litany of problems for employers trying to strike a balance between maintaining discipline and respecting workers’ Section 7 rights.[14] As board member Philip Miscimarra observed in the William Beaumont decision (discussed below), “[t]he ‘reasonably construe’ standard has defied all reasonable efforts to apply and explain it.”[15]

The difficulty of applying this standard became evident in a 2014 case involving Wendy’s International LLC. There, the NLRB issued a complaint alleging “that many of the employee handbook rules … were unlawfully overbroad under Lutheran Heritage’s first prong.”[16] Wendy’s settled the complaint, resulting in a near-complete overhaul of the Wendy’s national employee handbook.[17]

In the wake of the Wendy’s settlement, in 2015 then-board general counsel Richard Griffin issued a lengthy and detailed memo expressly acknowledging that a clear majority of rules that failed the Lutheran Heritage test failed the first prong.[18] In an attempt to mitigate confusion, Griffin examined examples, primarily drawn from the Wendy’s handbook, of employer work rules evaluated through the lens of the first prong.[19] Griffin moved topic by topic, addressing employer work rules that covered a variety of issues, from civility and confidentiality to conflicts of interests and walkouts.[20] Griffin’s memo sought to illustrate how employers could bring work rules and handbooks into compliance with Lutheran Heritage while maintaining employee discipline.[21] Although illuminating and undoubtedly helpful for many employers, critics of the Lutheran Heritage test were not satisfied. Chief among the critics was then board member Philip Miscimarra.

Winds of Change

In 2016, leading up to the Boeing decision, the NLRB decided another dispute over employer work rules that were alleged to violate Section 7 rights. In William Beaumont Hospital, board member (and soon-to-be chairman) Miscimarra wrote a dissent in which he first argued the need to overturn the Lutheran Heritage test.[22] The majority structured their opinion to respond directly to Miscimarra’s dissent. The opinion provides unique insight into the competing arguments around this topic and to the future direction of the NLRB once Miscimarra became board chair.

From Miscimarra’s perspective, the first prong of the Lutheran Heritage test had a number of defects. Most glaring to him was its failure to properly weigh an employer’s right to create reasonable work rules.[23] To resolve this problem, and others, he urged his colleagues to reject the reasonably construe standard and instead use a balancing test, weighing the adverse impact on employees’ Section 7 rights against the importance of the business objective served by the work rule at issue.[24] Miscimarra reminded his colleagues that the U.S. Supreme Court traditionally put the “right of employers to maintain discipline in their establishments” on an equal footing as workers’ Section 7 rights.[25] In his view, a proper test would strike a balance between these concerns in a way that “strictly applying the Lutheran Heritage ‘reasonably construe’ test” could not effectively achieve.”[26]

Miscimarra enumerated “considerations [that] would have particular relevance.”[27] The first priority for the NLRB under this new standard for evaluating facially neutral rules would be to weigh the potential adverse impact on protected activity against the legitimate justifications that may be associated with it.[28] In order for this test to achieve its maximum efficacy, Miscimarra contended the NLRB should differentiate among different types of protected activities and different types of justifications, with the understanding that both will have central components that command more weight and more peripheral concerns that are less important.[29] He also suggested the NLRB distinguish between different industries and work settings.[30] Lastly, Miscimarra suggested that the NLRB consider “particular events that might be associated with a specific rule.”[31] Miscimarra believed that incorporating these considerations into his proposed balancing test would be a considerable improvement to the Lutheran Heritage test.

At the time, Miscimarra’s fellow NLRB members criticized his suggestion of rescinding the Lutheran Heritage test as “misplaced.”[32] They rejected Miscimarra’s proposed change, saying that it “provide[d] no greater clarity in the law and would potentially undermine the essential protections of the Act.”[33] They felt that if the NLRB granted additional deference to employers, the act’s protections would be ineffectual. The majority also argued Miscimarra’s concerns over an employer’s right to maintain discipline were overstated. The majority pointed out that where rules are tailored in an appropriate manner, the business justification will be readily apparent and, therefore, an employee could not “reasonably construe the language to prohibit Section 7 activity.”[34] In short, the majority’s view was that Lutheran Heritage worked, and it did not need to be fixed. Although this argument won this battle, the war was far from over.

The Boeing Decision

In December 2017, Miscimarra, now the chairman of the NLRB (and with the backing of new board appointees), was given the opportunity to overturn Lutheran Heritage. The Boeing case involved a work rule prohibiting employee use of camera-enabled devices at work.[35] Employing a nearly identical argument to his dissent in William Beaumont, Miscimarra, writing for the majority, overruled the first prong of the Lutheran Heritage test. He did away with the reasonably construe standard, replacing it with his balancing test. The new test requires balancing the potential impact of the work rule on employees’ Section 7 rights against the legitimate business justifications associated with the rule.[36] Miscimarra reiterated his belief that by using a test that considers the employer’s interests, the NLRB was able to give “meaningful consideration to the real world ‘complexities’ associated with many employment policies, work rules and handbook provisions.”[37] Although Miscimarra lifted much of this opinion almost word for word from his William Beaumont dissent, he went further in detailing how the new test would be applied.

Miscimarra developed a “three category test” and explained that a work rule would be evaluated against one of those categories, depending on the rule’s characteristics.[38]

A Category One work rule is a rule that would not interfere with an employee’s exercise of Section 7 rights when reasonably interpreting the rule or if business justifications associated with the rule outweigh the potential adverse impact on protected rights.

Category Two work rules contain both a potentially adverse impact on protected rights and legitimate business justifications. These rules require individualized scrutiny because the legality of the rule is not readily apparent to the NLRB or an administrative law judge.[39] In situations involving Category Two work rules, special circumstances surrounding the rule, including its application or enforcement, will have greater impact on the outcome of the analysis than those involving Category One or Three rules.[40] These factors include those listed by Miscimarra in the William Beaumont dissent and reiterated in Boeing, including the type of employee right threatened, the legitimacy of the business justifications offered, the industry or work environment contemplated, and specific events that may have led to creation of the rule.[41]

Category Three work rules are those that are facially unlawful and have no countervailing business justification.[42] An example of a Category Three rule provided by Miscimarra is the long standing prohibition against restricting employees’ ability to discuss wages or benefits with one another.[43]

The new standard may have increased clarity, at least according to Miscimarra, but with limited precedent to guide how the new test would be applied, it also decreased clarity in what employers could expect from the NLRB at least in the near future. In an attempt to address this problem, the Office of the General Counsel released a memorandum to guide employers on how to bring their work rules into compliance.[44]

The new standard developed by the NLRB required the general counsel to take a different approach to explain its intricacies. Since the new Boeing test evaluated work rules on an individualized basis, applying a combination of factors instead of a single analysis, General Counsel Robb could not easily offer bright line distinctions between lawful and unlawful work rules.[45] Instead, Robb organized his memo around the new category system.[46] Most of the key work rules Robb evaluated, instead of violating the first prong of Lutheran Heritage, became relatively benign “Category One” work rules under the new standard.[47]

Analysis of Category One Work Rules Under the New Standard – Rules That Generally Are Lawful to Maintain

Application of the New Standard to Certain Work Rules

General Counsel Robb’s memo focused primarily on evaluation of work rules under the new Category One standard. This is because many of those rules fell under the “reasonably construe” standard that was repudiated by the NLRB in Boeing. The following are examples of work rules that may have violated the act under the old standard but became Category One work rules under the new standard.

Civility Rules

Civility rules were at the core of the William Beaumont controversy.[48] Unlike Lutheran Heritage, under the new standard, as long as civility rules expressly focus on behaviors such as rudeness, name-calling, or gossip, they likely would be upheld.[49] The following are examples of such work rules that would be considered Category One:

- “Rude, discourteous or unbusinesslike behavior is forbidden.”[50]

- “‘Behavior that is rude, condescending or otherwise socially unacceptable’ is prohibited.”[51]

- “Employees may not make ‘negative or disparaging comments about the … professional capabilities of an employee or physician to employees, physicians, patients or visitors.’”[52]

- “‘Disparaging … the company’s … employees’ is prohibited.”[53]

- “Disparaging or offensive language is prohibited.”[54]

- “Employees may not post any statements, photographs, video or audio that reasonably could be viewed as disparaging to employees.”[55]

Rules Protecting Confidential Information and Documents or Business Secrets

As the Robb memo makes clear, there is relatively little tension between Section 7 and work rules protecting confidential employer information. Employees generally do not have a right to disseminate the employer’s confidential information.[56] “Employees [also generally] do not have a right . . . to disclose . . . information [gained] from unauthorized access/use of confidential records, or to remove [business] records from the employer’s premises.”[57] If rules are “specifically about accessing or disclosing confidential employee records or documents (as opposed to disclosing employee information), the rule will also not implicate Section 7 rights.”[58] There is the possibility that protected activity could be infringed by rules in this category when employees attempt to contact customers about a labor dispute. However, Robb describes these rights as “peripheral,” suggesting employers could overcome this potential issue with a strong business justification.[59] Illustrations of Category One work rules are:

-“No unauthorized disclosure of business secrets or other confidential information.”[60]

- “Information concerning customers . . . shall not be disclosed, directly or indirectly or used in any way.”[61]

No-Photography/No-Recording Rules

This category of rules was at the center of those at issue in Boeing. In that decision, the NLRB made clear that employers must be careful to avoid infringing on workers’ rights to record or photograph Section 7 activity.[62] This guidance notwithstanding, chairman Miscimarra has suggested in the past that no-recording rules could actually promote Section 7 rights by encouraging open dialogue.[63] By contrast, the NLRB’s “Division of Advice has concluded that a ban on . . . possession of cell telephones” in the workplace “may be unlawful where the employees’ [primary] method of communication is [through] the cell phone.”[64] Nonetheless, an employer may well be able to justify such bans to the extent it can articulate a legitimate interest in limiting recording or photography on company property such as to ensure security or protection of proprietary, confidential, and customer information.[65] The Boeing decision itself provides an example of a related policy that was found valid given the business justification at issue (security concerns as a defense contractor):

“Use of [camera-enabled devices] to capture images or video is prohibited . . .”[66]

Other examples of Category One work rules are:

- “Employees may not ‘record conversations, phone calls, images, or company meetings with any recording device’ without prior approval.

- Employees may not record telephone or other conversations they have with their co-worker, managers, or third parties unless such recordings are approved in advance.”[67]

General Rules Prohibiting Insubordination

Generally, rules prohibiting insubordination have not run afoul of Section 7, even before Boeing.[68] As long as employers avoid language that expressly prohibits Section 7 activity, the risks of violating Section 7 have historically been low.[69] General Counsel Robb’s examples of Category One work rules prohibiting insubordination are:

- “Being uncooperative with supervisors . . . or otherwise engaging in conduct that does not support the [Employer’s] goals and objectives” is prohibited.

- “Insubordination to a manager or lack of . . . cooperation with fellow employees or guests” is prohibited.[70]

Disruptive Behavior Rules

According to Robb, rules prohibiting disruptive behavior normally would not be interpreted by employees as limiting their Section 7 rights. However, Robb points out that in some cases, the type of behavior prohibited by these rules “appear to apply to the classic core protected concerted activity such as walk-outs, protests, picketing, strikes, and the presentation to management of petitions or grievances.”[71] As with all work rules, the issue is the articulated business justification behind the rule and how it is applied. As Robb points out, “this type of rule clearly applies most directly to the employer’s substantial interests in safety and productivity, and employees would reasonably understand the rule not to be about protected concerted activity.”[72] Examples of Category One work rules are:

- “Boisterous and other disruptive conduct is prohibited.

- Creating a disturbance on Company premises or creating discord with clients or fellow employees is prohibited.

- Disorderly conduct on Hospital premises and/or during working hours for any reason is strictly prohibited.”[73]

Rules Regulating Use of Employer Logos/Intellectual Property

Robb suggests that “usually employees will understand this type of rule as protecting the employer’s intellectual property from commercial and other non-Section 7 related uses.”[74] Robb expressed an understanding that “[e]mployers have a significant interest” in ensuring their logos are not misappropriated.[75] The NLRB also has validated an employer’s desire not to have its logo displayed next to a message that it does not condone and which might give the appearance of the employer’s approval.[76] Examples of relevant Category One work rules are:

- Employees will not “create any materials that incorporate the [Employer’s] Marks or any derivatives of the [Employer’s] Marks other than as expressly approved by [the Employer] in writing.”[77]- “Do not use any Company logo, trademark, or graphic [without] prior written approval.”[78]

Rules Banning Disloyalty, Nepotism, or Self-EnrichmentIn his memo, general counsel Robb points out that these types of rules were valid even before Boeing. Specifically, rules prohibiting employee conflicts of interest have long been held valid and likely will continue to be valid. Examples of such rules are:

- Employees may not engage in conduct that is “disloyal … competitive, or damaging to the company” such as “illegal acts in restraint of trade” or “employment with another employer.”

- Employees are banned from active investments … that compete with the Company, interferes with one’s judgment concerning the Company’s best interests, or exploits one’s position with the Company for personal gain.”[79]

What Next?

Union and non-union employers must remain mindful of the rights the act guarantees to employees to engage in protected concerted activity. Work rules that stand the best chance of passing NLRB muster will not expressly restrict activity protected by Section 7 of the act and will be supported by clear business justification.

This area of the law likely will continue to evolve as the composition of the NLRB changes. Given the interests at stake, the direction this area of the law will take from here is anyone’s guess.

Endnotes

Brian J. Christensen	Austin O. Jaspers

1 Brian J. Christensen is a principal with the national labor and employment law firm of Jackson Lewis P.C. He is a member of The Missouri Bar and manages the Jackson Lewis Kansas City Region Office.

2 Austin O. Jaspers is a third-year law student attending the University of Kansas School of Law. He will be joining the national labor and employment law firm of Jackson Lewis P.C. following his graduation in 2019.

3 Memorandum from Peter B. Robb, General Counsel of the National Labor Relations Board, to All Regional Directors, Officers-In-Charge, and Resident Officers, GC 18-04 (June 6, 2018), available at https://www.americanbar.org/content/dam/aba/events/labor_law/2018/AnnualConference/papers/GCMEM1804.pdf (“Robb memorandum”); Memorandum from Richard F. Griffin, Jr., General Counsel of the National Labor Relations Board to All Regional Directors, Officers-In-Charge, and Resident Officers, GC 15-04 (March 18, 2015) available at https://www.aaup.org/sites/default/files/NLRB%20Handbook%20Guidance.pdf.

4 Boeing, 365 N.L.R.B. No. 154, slip. op. at 3 (2017) (explaining that “[o]ver the past decade and one-half, the Board has invalidated a large number of common-sense rules and requirements that most people would reasonably expect every employer to maintain.”).

5 Robb memorandum, supra note 3.

6 Lutheran Heritage Village-Livonia, 343 N.L.R.B. 646 (2004).

7 Id.

8 Id. at 646.

9 Examples of the work rules at issue were rules prohibiting “abusive and profane language,” “verbally abusing a supervisor,” and “[h]arassment of other employees, supervisors, and any other individuals in any way.” Lutheran Heritage-Livonia, at 646-55.

10 See Lutheran Heritage-Livonia, supra note 6, at 646-47.

11 Id.

12 Id. at 647.

13 Id. at 646 (citing Lafayette Park Hotel, 326 N.L.R.B. 824, 825 (1998)).

14 Boeing, 365 N.L.R.B. No. 154, slip op. at 12 (listing multiple instances of conflicting results from the Board’s application of prong one of the Lutheran Heritage test).

15 William Beaumont Hospital, 363 N.L.R.B. No. 162, slip op. 15, n. 38 (2016) (Miscimarra, dissenting) (citing GC Memorandum 15-04 (March 18, 2015); GC Operations Memorandum 12–59 (May 30, 2012); GC Operations Memorandum 12-31 (Jan. 24, 2012); GC Operations Memorandum 11–74 (Aug. 18, 2011). See also U.S. Chamber of Commerce, Theater of the Absurd: The NLRB Takes on the Employee Handbook, https://www.uschamber.com/sites/default/files/documents/files/nlrb_theater_of_the_absurd.pdf (criticizing the Board’s decisions regarding employee handbook policies as “seem[ing] to run counter to any balanced reading of the NLRA”) Id. at 4; Alexandra Hemenway, The NLRB and Social Media: Does the NLRB “Like” Employee Interests?, 38 J. Corp. L. 607 (2013) (citing inconsistencies in the Board’s interpretation of social media policies); Geordan G. Logan, Social Media Policy Confusion: The NLRB’s Dated Embrace of Concerted Activity Misconstrues the Realities of Twenty-First Century Collective Action, 15 Nev. L.J. 354, 372 (2014) (“The Board’s inconsistent adaptation of the NLRA to social media policies is ‘causing concern and confusion.’”).

16 Memorandum from Richard F. Griffin, Jr., General Counsel of the National Labor Relations Board to All Regional Directors, Officers-In-Charge, and Resident Officers, GC 15-04 (March 18, 2015), https://www.aaup.org/sites/default/files/NLRB%20Handbook%20Guidance.pdf.

17 Id.

18 Id.

19 Id.

20 Id.

21 Id.

22 William Beaumont Hospital, 363 N.L.R.B. No. 162, slip op. at 7 (2016) (Miscimarra, dissenting).

23 William Beaumont Hospital, supra note 22, at 8 (2016) (Miscimarra, dissenting).

24 Id. at 9 (Miscimarra, dissenting) (citing Nat’l Labor Relations Bd. v. Great Dane Trailers, Inc., 388 U.S. 26, 33–34 (1967)) (explaining “[t]he Board must carry out what the Supreme Court has repeatedly described as the Board’s duty when determining whether particular work requirements unlawfully interfere with NLRA-protected rights. The Board has the ‘duty to strike the proper balance between . . . asserted business justifications and the invasion of employee rights in light of the Act and its policy.’”).

25 William Beaumont Hospital, supra note 22, at 8 (Miscimarra, dissenting) (citing Republic Aviation v. NLRB, 324 U.S. 793 (1945)).

26 Id. at 12.

27 Id. at 18.

28 Id. at 18-19.

29 Id. at 9.

30 Id. at 19.

31 Id. at 9.

32 Id. at 3.

33 Id.

34 Id. at 4.

35 Boeing, 365 N.L.R.B. No. 154, slip. op. at 3 (2017).

36 Id.

37 Id. at 2.

38 Id. at 3-4

39 Id. at 4, n. 15.

40 Id.

41 Id. at 4, n. 15-16.

42 Id. at 4, n. 15.

43 Id. at 4. The Board did not alter the last two prongs of the Lutheran Heritage test in the Boeing decision. The applicability of the new standard is limited to rules that are facially neutral as maintained, i.e., rules that do not expressly outlaw activity protected under Section 7, rules that are not promulgated in response to union or other Section 7 activity, or rules applied to restrict the exercise of Section 7 rights. Despite this, the significance of this decision to employers and their employees should not be understated. Before Boeing, both courts of law and the Board used Lutheran Heritage as precedent in their decisions and, as previously stated, the first prong of this test was the prong cited to strike down a rule in a majority of those instances.

44 Comparing Memorandum from Peter B. Robb, General Counsel of the National Labor Relations Board to All Regional Directors, Officers-In-Charge, and Resident Officers, GC 18-04 (June 6, 2018); with Memorandum from Richard F. Griffin, Jr., General Counsel of the National Labor Relations Board to All Regional Directors, Officers-In-Charge, and Resident Officers, GC 15-04 (March 18, 2015).

45 Robb memorandum, supra note 3.

46 Id.

47 Id.

48 William Beaumont Hospital, 363 N.L.R.B. No. 162, slip op. at 1 (2016); Boeing, 365 N.L.R.B. No. 154, slip op. at 11 (2017).

49 Robb memorandum, supra note 3, at 3-4.

50 Id. at 4.

51 Id. at 3.

52 Id.

53 Id.

54 Id. at 4.

55 Id.

56 Id.at 9.

57 Robb memorandum, supra note 3, at 10. See Macy’s, Inc., 365 N.L.R.B. No. 116, slip op. at 3 (2017); Cellco Partnership d/b/a Verizon Wireless, 365 N.L.R.B. No. 38 slip op. at 8 n.28, 8-9 (Feb. 23, 2017) (Miscimarra dissenting in part and concurring in part).

58 Robb memorandum, supra note 3, at 10.

59 Id.

60 Id. at 10.

61 Id. at 9. See Schwan’s Home Service, Inc., 364 N.L.R.B. No. 20, slip op. at 16 (June 10, 2016) (dissenting, Miscimarra argues this rule would be lawful under his then William Beaumont test).

62 Boeing, supra note 36.

63 Whole Foods Market Inc., 363 N.L.R.B. No. 87, slip op. at 7 (Miscimarra dissenting).

64 Robb memorandum, supra note 3, at 6.

65 Boeing, supra note 36, slip op. at 17–19.

66 Id. slip op. at 5; Robb memorandum, supra note 6, at 5.

67 Robb memorandum, supra note 6, at 5.

68 See Flamingo Hilton-Laughlin, 330 N.L.R.B. 287, 588-89 (1999).

69 Robb memorandum, supra note 3, at 7.

70 Id.

71 Id. at 8.

72 Id.at 9.

73 Id. at 8.

74 Robb memorandum, supra note 3, at 13.

75 Id. at 14.

76 Memorandum from Jayme L. Sophir, Associate General Counsel, Division of Advice to John D. Doyle, Regional Director, Region 10, Re: Kumho Tires, Case 10-CA-208153 & 10-CA-208414 (June 11, 2018), available at https://shawe.com/wp-content/uploads/2018/07/10_ca_208153_06_11_18_.pdf.pdf.

77 Memorandum from Jayme L. Sophir, Associate General Counsel, Division of Advice to Jill H. Coffman,, Regional Director, Region 20, Re: Lyft, Inc., Case 20-CA-171751 (June 14, 2018), available at https://shawe.com/wp-content/uploads/2018/07/20_ca_171751_06_14_18_.pdf.pdf.

78 Robb memorandum, supra note 3, at 13.

79 Id. at 15.