The National Labor Relations Board (“NLRB” or “Board”) is responsible for enforcement of employee rights under Section 7 of the National Labor Relations Act (NLRA) to engage in protected concerted activity, such as organizing unions, discussing wages and discipline, and other terms and conditions of employment.
Many employers are not mindful of the fact that these rights extend to both unionized and non-union workplaces. With the decline in union membership, the NLRB has increasingly turned its focus away from unionization issues to workplace practices that may run afoul of employee rights under the NLRA, as illustrated by two recent decisions from the Board.
The Landmark Stericyle Decision’s Impact On Employee Handbooks and Other Workplace Rules
In 2017 the Trump Era Board issued a new, more employer friendly standard for assessing when facially-neutral workplace rules could be construed to chill employees’ Section 7 rights. In its Boeing Co. decision, the Board announced a new three category test that balanced the employer’s interests in maintaining discipline and productivity and protecting its property, against employee rights to engage in concerted activities protected by the NLRA. The Boeing Board determined that certain categories of workplace rules (e.g., workplace civility, no-photography/recording, confidentiality of workplace investigations, insubordination, and defamation rules) were generally lawful because when reasonably interpreted, they do not prohibit or interfere with employees’ exercise of NLRA rights, or the potential adverse impact on those rights was outweighed by the employer’s legitimate business interests. A second category of workplace rules (e.g., conflict-of interest, confidentiality, media contact and off-duty conduct rules) posed the potential of interfering with Section 7 Rights and therefore should be subject to “individualized scrutiny” to determine if there was interference and if so, whether any adverse impact upon protected rights was outweighed by the employer’s legitimate justifications. A third category of rules (e.g., confidentiality rules prohibiting discussions of wages and rules prohibiting joining outside organizations) were deemed generally unlawful.
The Stericyle Standard: In Stericycle, the Board found fault with Boeing’s categorical approach, reasoning that it gave too much weight to the employer’s interests. The Board determined that the Boeing standard permitted employers to adopt overbroad work rules that could chill the exercise of Section 7 rights and dispensed with the requirement that employers narrowly tailor all workplace rules to avoid unnecessary burdening of employee rights. In overruling Boeing, the Board noted that “the standard we adopt remedies these fundamental defects.”
Under the new standard, the NLRB’s General Counsel must prove that a rule has a reasonable tendency to chill an employee’s exercise of rights. If this burden is established, the rule is presumptively invalid. To rebut that presumption, the employer must prove that the rule advances a “legitimate and substantial” business interest that cannot be advanced with a more narrowly tailored rule. This approach rejects the Boeing notion that there are categories of rules that are presumptively valid in favor of a case-by-case approach in all cases.
Consequences for Employers: The Stericyle standard eases General Counsel’s burden to show that a work rule may chill employee rights, and employers will face a tough battle trying to rebut the presumption of invalidity of the challenged work rule. To avoid costly challenges, employers should review their workplace policies to ensure that they can meet the new “narrowly tailored” standard.
The Atlantic Opera Decision Modifies – Yet Again – The Test For Independent Contractor Status
On June 13, 2023, the Board reverted to its prior employee friendly independent contractor test to find that makeup artists, wig artists, and hairstylists (“the stylists”) working for the Atlanta Opera were employees rather than independent contractors. Under the revived test, employers face a higher bar when seeking to classify workers as independent contractors excluded from the protections of the NLRA.
The Discarded SuperShuttle Standard: Since 2014 the NLRB applied the following non-exhaustive list of factors to determine independent contractor status:
- The extent of control the employer exercises over the work
- Whether the worker is engaged in a distinct occupation or business
- Whether the work is done under the direction of the employer without supervision
- The skills required for the occupation
- Who supplies the instrumentalities, tools, and place of work
- The length of time the worker is engaged
- Whether the worker is paid by time or by job
- Whether or not the work is a part of the regular business of the employer
- Whether the parties believe there is an employer-employee relationship
Generally, these factors were considered equally, with no factor being given more weight than another.
However, under the NLRB’s Trump Era ruling in SuperShuttle DWF, Inc.(2019), the Board modified the test, reasoning that entrepreneurial opportunity for economic gain or loss was an “animating principle” to be applied to all factors of the independent contractor analysis. Under this approach, special weight was given to entrepreneurial opportunity by evaluating all factors based on the effect each factor had on a worker’s independence to pursue economic gain. This revised standard made it easier for workers in the gig economy to be classified as independent contractors.
The “New” Atlanta Opera Standard: In the Atlanta Opera decision, the NLRB dispensed with the SuperShuttle test’s focus on entrepreneurial opportunity as a decisive factor in the independent contractor analysis. Rather, the Board reverted to its prior standard which requires all factors be considered in light of the factual circumstances, with no one factor given more weight than another. Further, when considering a worker’s entrepreneurial opportunity, the NLRB will only consider actual opportunities, not theoretical opportunities.
Applying this new standard, the Board found that the stylists were employees, even though they were engaged in a distinct business, had specialized skills, and worked on a project basis rather than for an indefinite period generally associated with an employer-employee relationship. The Board also found that the stylists’ entrepreneurial opportunity was merely theoretical because there was no other opera in town that could engage the stylists to work.
Effect on Employers
The factors that the NLRB considers when determining whether a worker is an independent contractor have not changed. However, in reverting back to the more “employee-friendly” approach that considers entrepreneurial opportunity as only one factor may impact employers who heavily relied on this factor to establish independent contractor status in the current gig economy. Employers must be mindful of this change in the NLRB’s approach when hiring new workers and continuing to classify workers as independent contractors who cannot meet the requirements of the new standard.