Stericycle, Inc.: The Pendulum Swings Again on Confidentiality Restrictions
In Stericycle, Inc., 372 NLRB No. 113 (2023), the National Labor Relations Board again changed course regarding the standard to evaluate facially neutral workplace rules under the National Labor Relations Act. The decision directly impacts the use of confidentiality restrictions relating to workplace investigations. Stericycle returns the inquiry to a case-by-case determination, under which a workplace rule is presumed unlawful if it could reasonably be interpreted to infringe on employee’s Section 7 rights. An employer can overcome the presumption if it proves that (1) the rule advances a legitimate and substantial business interest, and (2) the employer is unable to achieve that interest with any narrower rule.
The Board’s decision overrules The Boeing Company, 365 NLRB No. 154 (2017), and its progeny, including Apogee Retail d/b/a Unique Thrift Store, 368 NLRB No. 144 (2019), under which workplace rules were treated as categorically lawful or unlawful, or as subject to a balancing test that weighed their tendency to restrict employee rights against employers’ legitimate justifications. In Apogee Retail, the Board held that investigative confidentiality restrictions were categorically lawful to the extent they were explicitly limited to the duration of an investigation.
1. The New Stericycle Standard
Stericycle, which involved workplace rules related to personal conduct, conflicts of interest, and confidentiality of harassment complaints, expressly overruled Boeing on the ground that its categorical approach gave employers leeway to adopt overbroad workplace rules that chilled employees’ section 7 rights.
Stericycle adopts a strict new approach that builds on and revises the standard previously established in Lutheran Heritage Village-Livonia, 343 NLRB No. 646 (2004). Under the new Stericycle standard, a challenged rule is presumptively unlawful if it has a “reasonable tendency to chill employees from exercising their Section 7 rights.” This threshold is met if an employee “could reasonably interpret the rule to have a coercive meaning.” The Board evaluates rules from the 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. The employer’s intent in maintaining the rule is immaterial—if an employee could reasonably interpret the rule to arguably limit employee rights, the burden is met, even if a contrary, noncoercive interpretation of the rule also is reasonable. Ambiguous rules are properly construed against the employer.
Following this showing, the presumptive unlawfulness may be rebutted by an employer who proves the rule “advances legitimate and substantial business interests that cannot be achieved by a more narrowly tailored rule.” The rule is evaluated in the context of legitimate and substantial business interests of the employer in maintaining a specific work rule under the particular circumstances. The Board examines “specific wording of the rule, the specific industry and workplace context in which it is maintained, the specific employer interests it may advance, and the specific statutory rights it may infringe.”
If the employer proves its defense, then the workplace rule will be found lawful to maintain.
2. Stericycle’s Impact on Investigative Confidentiality Restrictions
Stericycle provides little clarity regarding the new standard’s application to investigative confidentiality instructions, beyond declaring that the Board rejects the Apogee Retail principle that limited-duration investigative confidentiality rules were always lawful to maintain, no matter how they were written and no matter what employer interests were invoked (or not invoked) to justify them.
The Stericycle dissent calls the Board majority’s failure to address the specific type of rules at issue in Apogee Retail “unfortunate,” because Apogee Retail gave employers “certainty beforehand” regarding the use of investigative confidentiality instructions, removing fear of later evaluations labeling its conduct an unfair labor practice. The dissent recalled that Banner Estrella Medical Center, 362 NLRB 1108 (2015) (a pre-Boeing decision), which also called for investigative confidentiality instructions to be dealt with on a case-by-case basis, “effectively prohibited employers from requiring confidentiality from the outset, by workplace rule or otherwise, since an employer could not know whether it would be able to make the showing Banner Estrella demanded until its investigation was underway.” The dissent predicts Stericycle may revive that predicament.
3. Takeaways from Stericycle
Private employers should reevaluate their use and phrasing of investigation-related confidentiality policies in light of Stericycle. [FN1] The Board will no longer treat limited-duration investigative confidentiality instructions as categorically lawful, and it will separately scrutinize such rules on their own merits.
Stericycle unquestionably heightens the risks of using a confidentiality admonition in investigations, as employers will face a tall hurdle to overcome the presumptive unlawfulness of any such instruction. Employers must now weigh the risks of being unable to meet this burden in the future against the risks of compromising the integrity of the investigation and/or employee privacy now, on a case-by-case basis.
Further guidance may be forthcoming, however: the Stericycle Board remanded the facial challenge to the investigative confidentiality rule at issue in its decision to the administrative law judge, instructing him to apply the new standard. This upcoming decision may provide some insight into how administrative law judges will apply the new standard going forward.
Ongoing vigilance would be prudent as well. If history repeats itself, the NLRB pendulum could always swing back the other way in the next few years.
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FN1 Note that Stericycle does not apply to public sector employers, who remain subject to a 2014 decision by the California Public Employment Relations Board (PERB) holding that a broad confidentiality directive violates employee rights.