Could Your Employee Handbook Lead to Liability?

Could Your Employee Handbook Lead to Liability?

Employee handbooks are intended to reduce legal risks in the workplace. However, if not properly drafted to comply with state and federal laws, they can sometimes do more harm than good. The National Labor Review Board (NLRB or Board) recently issued new guidance regarding when employee handbooks may violate the National Labor Relations Act (NLRA). In good news for New Jersey employers, the new guidance is more business-friendly.

NLRB’s Boeing Decision

In 2017, the NLRB established a new test for evaluating employers’ work rules. The Board’s decision in The Boeing Company, 365 NLRB No. 154 (2017) reflects a more business-friendly standard that focuses on the balance between the rule’s negative impact on employees’ ability to exercise their Section 7 rights and the rule’s connection to employers’ right to maintain discipline and productivity in their workplace.

The new test provides that the Board will find a rule unlawful if it explicitly restricts employees’ protected concerted activity. If the rule is not explicitly unlawful, the Board will evaluate two things: (1) the rule’s potential impact on protected concerted activity; and (2) the employer’s legitimate business justifications for maintaining the rule. If the justifications for the rule outweigh the potential impact on employees’ rights, the rule is lawful. Conversely, if the potential impact on employees’ rights outweighs the justifications for the rule, it is unlawful.

In Boeing, the NLRB also divided employment policies, rules, and handbook provisions into three categories:

• Category 1: Rules 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.
• Category 2: 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: Rules that 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.

NLRB Employee Handbook Guidance

In GC Memorandum 18-04, the General Counsel of the NLRB notes that that ambiguities in rules should no longer be interpreted against the drafter. Moreover, generalized provisions should not be interpreted as banning all activity that could conceivably be included within the rule. Accordingly, Regional Offices must now determine whether a rule would be interpreted as prohibiting Section 7 activity, as opposed to whether it could conceivably be so interpreted. The General Counsel also advises the Board’s regional directors into which of the three categories certain workplace rules fall.

Category 1 Rules

Category 1 rules are generally considered lawful. They include:

• Civility Rules, i.e. “Rude, discourteous or unbusinesslike behavior is forbidden.”
• No Photography and No Recording Rules, i.e. “Employees may not record telephone or other conversation they have with their coworker, managers or third parties unless such recordings are approved in advance.”
• Rules Against Insubordination, Non-cooperation, or On-the-job Conduct that Adversely Affects Operations, i.e. “Insubordination to a manager or lack of . . . cooperation with fellow employees or guests is prohibited.”
• Disruptive Behavior Rules, i.e. “Disorderly conduct on Hospital premises and/or during working hours for any reason is strictly prohibited.”
• Rules Protecting Confidential, Proprietary, and Customer Information or Documents, i.e. “Do not disclose confidential financial data, or other non-public proprietary company information. Do not share confidential information regarding business partners, vendor, or customers.”
• Rules against Defamation or Misrepresentation, i.e. “[M]isrepresenting the company’s products or services or its employees is prohibited.”
• Rules against Using Employer Logos or Intellectual Property, i.e. “Do not use any Company logo, trademark, or graphic [without] prior written approval.”
• Rules Banning Disloyalty, Nepotism, or Self-Enrichment, i.e. “Employees are banned from activities or 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.”

As the NLRB highlights, merely maintaining a facially lawful rule does not determine whether the rule was applied lawfully. Accordingly, simply because a rule falls in Category 1 does not mean an employer may lawfully use the rule to prohibit protected concerted activity or to discipline employees engaged in protected concerted activity.

Category 2 Rules

Category 2 rules are not obviously lawful or unlawful. Accordingly, they must be evaluated on a case-by-case basis pursuant to Boeing to determine whether the rule would interfere with rights guaranteed by the NLRA, and if so, whether any adverse impact on those rights is outweighed by legitimate justifications. Examples include:

• Broad conflict-of-interest rules that do not specifically target fraud and self-enrichment and do not restrict membership in, or voting for, a union;
• Confidentiality rules broadly encompassing “employer business” or “employee information” (as opposed to confidentiality rules regarding customer or proprietary information, or confidentiality rules more specifically directed at employee wages, terms of employment, or working conditions);
• Rules regarding disparagement or criticism of the employer (as opposed to civility rules regarding disparagement of employees);
• Rules regulating use of the employer’s name (as opposed to rules regulating use of the employer’s logo/trademark);
• Rules generally restricting speaking to the media or third parties (as opposed to rules restricting speaking to the media on the employer’s behalf);
• Rules banning off-duty conduct that might harm the employer (as opposed to rules banning insubordinate or disruptive conduct at work, or rules specifically banning participation in outside organizations); and
• Rules against making false or inaccurate statements (as opposed to rules against making defamatory statements).

Category 3 Rules

Category 3 rules are generally unlawful because they would prohibit or limit NLRA-protected conduct, and the adverse impact on the rights guaranteed by the NLRA outweighs any justifications associated with the rule. Examples include:

• Confidentiality Rules Specifically Regarding Wages, Benefits, or Working Conditions, i.e. “Employees are prohibited from disclosing salaries, contents of employment contracts…”
• Rules Against Joining Outside Organizations or Voting on Matters Concerning Employer

Key Message for NJ Employers

Prior to the Board’s reversal in position, employers were understandably wary of prohibiting employee conduct when drafting workplace rules for fear that they could be interpreted as potentially restricting employees’ rights under Section 7. The Boeing decision and subsequent NLRB guidance give employers greater flexibility when drafting employee handbook provisions. Of course, employers must ensure that they follow the NLRB’s guidance and should always consider having an experienced New Jersey employment attorney review any handbook changes.

If you have any questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Sean Dias, at 201-806-3364.