On December 14, 2017, the National Labor Relations Board (NLRB) reversed its decision in the infamous Lutheran Heritage Village-Livonia matter, which for years has produced confusing and unpredictable decisions relating to objectively facially neutral provisions in employers’ handbooks that the Board has ruled are unlawful because they may restrict activities protected by Section 7 (giving employees the right to self-organization, to form, join or assist labor organization and to collective bargaining, etc.) Under the Lutheran Heritage test, the Board first examined whether the challenged rule explicitly restricts activities protected by Section 7. If it did, the Board would determine that the rule was unlawful. If the rule did not explicitly violate Section 7, the Board could still determine that the rule was unlawful upon a showing that: (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. Most of the confusion of the Lutheran Heritage test was the interpretation of the phrase “reasonably construe.”

In reaching its decision to overrule Lutheran Heritage, the Board identified numerous defects with the application of the Lutheran Heritage standard including the frequent invalidation of facially valid rules because they were ambiguous, the difficulty in interpreting the “reasonably construe” language which in turn led to too rigid of an application of the rule, and the frank unpredictability of the results over the last several years.

After overruling Lutheran Heritage, the Board adopted a new standard for evaluating a facially neutral policy, rule or handbook provision, which when reasonably evaluated may interfere with NLRA rights. Under the new rule, the Board will evaluate: (1) the nature and extent of the potential impact on NLRA rights; and (2) legitimate justifications associated with the rule. Critically, the Board determined that the new rule will be applied retroactively to the case before it and to all other pending cases. The Board expects to delineate three categories of employment policies under the new rule including (a) rules that the Board designates as lawful to maintain; (b) rules that warrant individualized scrutiny in each case as to whether the rule interferes with NLRA rights and if so, the adverse impact on NLRA activity is outweighed by the legitimate justification for the rule; and (c) rules that are unlawful because they prohibit or limit NLRA protected conduct and the adverse impact on the NLRA activity is not outweighed by the justification for the rule. The Board believes that new rule will bring predictability to Board rulings and will, in effect, permit the employee handbook to communicate the employer’s expectations to the employee.

This is a significant victory for employers. Now that the Board has recognized that the Lutheran Heritage analysis has wreaked havoc in the employer/employee relationship (making it more difficult for employers to effectively communicate their expectations to employees via handbooks and rules), there is hope that the new rule will provide greater clarity and certainty to employees, employers and unions regarding what kind of rules may lawfully be maintained in the workplace. If applied correctly, the new rule will make it easier for employers to formulate and apply workplace rules without the fear of the rules being struck down as an illegal interference with their employee’s rights. This was a close decision and even the majority of the Board Members recognized that this decision was just the first of many on this subject and that the new rule announced today will certainly be subject to refinement in the future.