Employer Alert: Stericycle’s Impact on Non-Unionized Workplaces

The National Labor Relations Board recently issued a far-reaching decision in Stericycle, Inc. This ruling provides an updated legal standard for evaluating employer work rules’ impact on employees’ right to collectively address their terms and conditions of employment. The new legal test applies to both unionized and non-unionized employees under sweeping jurisdictional authority. Notably, this test does not apply to employers who enjoy religious liberty protections under the First Amendment and other applicable law. Employers should note whether Stericycle’s new legal standard is applicable to their organization and, if so, what modifications to employee handbooks and employment practices may be warranted.

This article explains relevant background of the National Labor Relations Board (“Board” or “NLRB”), summarizes the Stericycle decision, addresses jurisdictional exclusions for religious employers, focuses on employee handbooks and policies, and concludes with practical guidance for non-religious employers in light of Stericycle’s impact.

Legal Protection for “Concerted Activity”

Section 7 of the National Labor Relations Act (“NLRA” or “Act”) protects workers at both unionized and non-unionized workplaces who engage in “concerted activity,” defined as follows:

“[C]oncerted activity . . . is when two or more employees take action for their mutual aid or protection regarding terms and conditions of employment. A single employee may also engage in protected concerted activity if he or she is acting on the authority of other employees, bringing group complaints to the employer’s attention, trying to induce group action, or seeking to prepare for group action.”_[1]

Employers are prohibited from interfering with, restraining, or coercing employees who conduct concerted activities, under Section 8(a)(1) of the Act. The protections for employees in the Act are federally enforced by the NLRB. The NLRB’s standards for evaluating whether employers’ work rules violate Section 7’s protection as written (i.e., “facially neutral”) have been in flux for decades. This inconsistent legal landscape creates challenges for employers seeking optimal legal compliance.

The Path to Stericycle

In the 2004 Lutheran Heritage Village-Livonia decision, the NLRB adopted a broad standard that asked whether an employee could "reasonably construe" a workplace rule as prohibiting the exercise of Section 7 rights, such as the rights to organize and bargain collectively. The NLRB subsequently applied this standard to find many rules unlawful that were otherwise neutral, including rules prohibiting the use of cameras in production areas, disruptive behavior in the workplace, and speaking to the public or the media. Notably, this standard did not consider an employer’s legitimate business interest in crafting and implementing a policy.

The NLRB changed course in 2007 with its Boeing Co. decision. The Boeing ruling assessed whether a policy restricting the use of camera-enabled devices (e.g., cell phones on company property) unlawfully restricted employees' Section 7 rights. In Boeing, the NLRB overruled the Lutheran Heritage standard and established a “commonsense solution” for evaluating the legality of handbook policies under the NLRA. Under the Boeing standard, the NLRB would examine facially neutral policies and handbook provisions by assessing: (1) the rule's potential impact on protected concerted activity; and (2) the employer's legitimate business justifications for maintaining the rule.

Under the Boeing analysis, the NLRB attempted to classify rules into one of three categories, including a category of rules that were always lawful to maintain. In several decisions following Boeing, the NLRB held that lawful rules included the following: work rules requiring employee confidentiality during employer investigations; rules prohibiting outside employment; and civility rules requiring employees to maintain harmonious interactions and relationships. However, these categories did not take into account different employment contexts or business needs.

Responding to what it deemed an overbroad and unfriendly employee standard in Boeing, the NLRB reversed course in Stericycle, Inc. By overturning the Boeing standard, the NLRB essentially reinstated the Lutheran Heritage standard, with some added clarification regarding employer considerations.

Stericyle’s Three-Part Test

In Stericycle, Inc., a local union claimed that their employees’ employer maintained overly broad work rules for employees, including rules that (a) made workers keep harassment complaints confidential, (b) prevented employees from taking actions that could damage the employer's reputation, or (c) deterred employees from exercising their NLRA rights. In response, the Board set out a three-step process to evaluate an employment policy’s compliance with the Act.

1. The first step of the three-step process is to determine whether the challenged policy has any relation to employees’ Section 7 right to exercise their collective bargaining rights. If the relevant policy is even remotely related to an employees’ Section 7 rights under the NLRA, then the second step of the legal analysis applies.
2. Step two requires determining whether the challenged work rule/policy has a reasonable tendency to “chill”- that is, inhibit or discourage - employees from exercising their Section 7 rights. In doing so, the NLRB will interpret the rule from perspective of a “reasonable employee” who is economically dependent on the employer and thus inclined to interpret an ambiguous rule to prohibit protected activity they would otherwise engage in. The “reasonable employee” standard calls for interpretation of rules from the perspective of a layperson, not a lawyer. If an employee could reasonably interpret a rule to restrict or prohibit Section 7 activity, step two is satisfied. Any such rule is presumptively unlawful, even if the rule could reasonably be interpreted to not restrict Section 7 rights and even if the employer did not intend to restrict Section 7 rights.
3. Step three allows the employer to rebut the presumption that the rule is unlawful by proving that (a) the rule advances a legitimate and substantial business interest and (b) the employer is unable to advance that interest with a more narrowly tailored rule.

NLRB’s Jurisdictional Power: Not Within “Religious” Employment Contexts

The NLRB holds jurisdiction – that is, power to enforce the Act through rulings and other Board action - over private sector employers that engage in more than minimal interstate commerce activity. Typically, very little activity is sufficient for this jurisdictional threshold (e.g., online operations, multi-state travel). The NLRB’s power is thus very broad, covering the majority of non-government employers, including non-profits._[2] Despite this sweeping reach, the NLRB does not hold jurisdiction over religious employers and their employees who are involved in promoting such organizations’ religious missions. This exclusion is grounded in First Amendment and related religious liberty principles, protecting organizations and individuals from undue government interference.

Which organizations are sufficiently “religious” within this employment context? The NLRB has exerted jurisdiction over health care institutions with limited religious dimensions. In contrast, churches and other houses of worship are excluded from the NLRB’s jurisdiction and thereby free to exercise their religious liberty as they choose._[3] But what about other religious nonprofits - and perhaps even religious businesses?_[4]

A key court ruling is NLRB v. The Catholic Bishop of Chicago, in which the U.S. Supreme Court addressed the constitutionality of the NLRB’s jurisdictional authority over religious organizations. In this 1979 ruling, the Court set forth the following three-part test:

1. Determine if the NLRB’s exercise of jurisdiction over an employer would give rise to serious constitutional questions under the First Amendment, which guarantees the free exercise of religion;
2. If a serious constitutional question would arise, then the NLRB must show an “affirmative intention of the Congress clearly expressed” for its jurisdiction to exist; and
3. If no serious constitutional questions are raised, then further no inquiry is necessary to determine congressional intent– and NLRB may proceed with exercising such jurisdiction over the employer._[5]

The primary legal question when determining the NLRB’s jurisdiction is whether the employment context is sufficiently religious for religious liberty protections to apply. Courts have ruled the NLRB lacks jurisdiction over religious organizations if their activities are inherently religious, such as organizations (a) controlled by churches, (b) with religious affiliations, (c) with significant mission-related support, (d) requiring conformity with religious beliefs, or (e) with activities directly propagating religious tenets._[6] 

Religious Employers and Stericycle

For organizations with some religious dimension, such as a faith-based childcare center, the above legal considerations may warrant a careful evaluation of the extent of the organization’s religious nature, identity, and activities. Such evaluation may implicate other legal protections and practical consequences beyond the scope of this article, such as qualifications for the governing board and other leadership, donor relations, employment discrimination issues, government funding, and other potentially available legal exemptions.

Leaders of a faith-based organization seeking to enjoy NLRB-related status as a “religious organization” (and otherwise avail themselves of optimal legal protections) should consider measures such as:

• adding a statement of faith to the organization’s governing documents;
• checking the organization’s corporate purpose statement to make sure it reflects a religious nature; adding religious requirements in certain (or possibly all) job descriptions;
• determining whether programs and operations should be more religious in nature and scope; and
• reviewing or modifying related website information.

Such religious attributes should likewise be reflected in employee handbooks and related policies, such as: 

• a “welcome” message that identifies the organization’s religious nature;
• the organization’s statement of faith;
• an equal employment opportunity statement that includes recognition of the employer’s legal right to make faith-based distinctions;
• related adjustments to the anti-harassment policy;
• addition of scripture verses correlating to employee standards;
• social media policy language that incorporates religious aspects; and
• employee conduct standards that are rooted in religious principles and articulated as religiously-oriented standards.

Nonreligious Employers

What about employers that may not be sufficiently “religious” and therefore need to be mindful of the NLRB’s jurisdiction over them? Here are some important follow-up steps.

1. Examine Current Policies. Examine employee handbook policies in light of Stericycle, especially codes of conduct, social media, and any other policy that could involve employees engaging in “concerted activity.” When considering whether a policy should be modified, look at it from the perspective of an economically reliant employee. Ask whether that policy would have a reasonable tendency to discourage, keep, or otherwise inhibit (in legal parlance, “chill”) an employee from making changes in the workplace, through unionizing or collective bargaining. Employers should consider whether the rule – on its face, not necessarily only as applied in certain circumstances – could restrict an employee from gathering or sharing information about employer conduct with other employees and discussing ways to help change the work environment. Rules concerning civility in the workplace, bullying or harassing conduct, social media activity, off-duty conduct, access to the employer’s premises by off-duty employees, contacts with the media, dress codes, and even some safety rules, among many other rules, could be subject to challenge.
2. Articulate Compelling Reasons and Narrowly Tailor for Legal Validity. Just because an employment policy could be construed to prevent an employee from exercising their Section 7 rights under the Act does not prohibit an employer from retaining that policy in the handbook. Remember the applicable legal requirement is for employer to have (1) a compelling reason for having the policy and (2) the policy narrowly construed. For example, an employer may have a policy forbidding employees from recording employment meetings. An employer’s reason for adopting this policy is to protect sensitive and private donor information or strategic planning information discussed during these meetings—information the employer would ordinarily be expected to keep confidential. An employee could argue this policy keeps them from gathering evidence, and therefore in violation of the Act. However, the employer could properly structure such policy by articulated these legitimate reasons for the prohibition. Doing so provides a more narrowly tailored rule that reflects the policy’s compelling reason and makes it legally valid.
3. Include “Savings” Clauses. Consider adding a statement in the employee handbook that communicates the employer’s lack of intent to illegally limit any protected activity. While including a savings clause will not necessarily safeguard an employer from policies that clearly violate the Stericycle standard, including it would be a best practice - thereby demonstrating the employer is aware of the law and is aiming to follow it.
4. Stay Informed. Because the Stericycle standard is so new, there is a lack of clarity regarding specific ramifications and related applicability. As new legal cases are decided, specific examples and standards of acceptable and unacceptable policies will emerge. It is best practice to stay informed regarding legal developments and how the NLRB may enforce this new standard. Stay proactive and informed.

What About Violations?

What are the potential consequences are for having employment policies that violate Stericycle? For organizations with no unionized employees and subject to NLRB jurisdiction, adverse consequences may seem quite remote – only in the event of an employee complaint to the NLRB or other potential government scrutiny. Upon such NLRB inquiry, unlikely as it may be, a government finding that a work rule is unlawful under Stericycle may result in mandated removal, redaction, or replacement of unlawful language, followed by posting and distribution notices to employees acknowledging the violation and providing information about their rights under the Act.

Any adjudicatory finding that an unlawful rule has been maintained could also have complex downstream effects. Among other things, overly broad rules may be treated as unintentional evidence of unlawful discriminatory animus in connection with unlawful discrimination claims. Additionally, with respect to an employee’s claim of wrongful discharge or other adverse employment action, an employer’s stated reasons for discipline or termination of an employee could be challenged as illegal under Stericycle. For example, such violations could relate to code of conduct, social media posts, or confidentiality issues that involve employees’ “concerted activity.” As a result, affected employees may be entitled to remedial action such as back pay, rehiring, or restoration of lost benefits.

Moving On

Although Stericycle was issued by a government agency that regulates unions, it has a significant impact on both unionized and non-unionized organizations. Religious employers should be excluded from Stericycle’s reach, but only if they are sufficiently “religious” per applicable NLRB-related law. 

When in doubt, employers should assume such legal coverage. And to further address any such doubt, employers should evaluate and address religious aspects of their organizations and operations – with due attention to both NLRB-related and other legal implications beyond. Implementation may include employee handbook review, scrutiny of organizational governance documents, and polices, and then making modifications as warranted. Taking these steps will be helpful not only for legal compliance but also for improved organizational clarity and optimal employee relations.

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[1] See the National Labor Relations Board’s website. A few cited examples of protected concerted activities are:

• Two or more employees addressing their employer about improving their pay.
• Two or more employees discussing work-related issues beyond pay, such as safety concerns, with each other.
• An employee speaking to an employer on behalf of one or more co-workers about improving workplace conditions.

[2] The NLRB’s website contains additional information regarding its extensive jurisdictional reach.

[3] Such religious liberty protection is consistent with the ministerial exemption for religious employees, as recognized in Hosanna-Tabor and Our Lady Guadalupe Supreme Court rulings. For more information, please see our firm’s related blog article.

[4] The Fifth Circuit recently issued a key ruling in Braidwood Management vs. EEOC, on religious liberty protections for faith-based businesses. See our firm’s related blog article evaluating its implications for businesses and nonprofits.

[5] NLRB v. Catholic Bishop of Chicago, 440 U.S. 490, 507 (1979). See also NLRB v. Bishop Ford Catholic High School, 623 F. 2d 818 (2nd Cir. 1980), cert. denied, 450 U.S. 996 (1980).

[6] Saint Leo Univ. Inc. & United Faculty of Saint Leo, Nat’l Educ. Ass’n Florida Educ., Am. Fed’n of Teachers, Afl-Cio (Feb. 23, 2023) 2023 WL 2212789.