The NLRB Telegraphs the First of Many Knockouts of Trump Board Decisions

As we previously reported here, in numerous dissents issued in 2021, the National Labor Relations Board’s Chair McFerran blasted the Boeing Co. handbook and work rules standard due to her view that it was, for example, “so forgiving to employers that it cannot be reconciled with the Act’s guarantees to employees.” And the NLRB’s top lawyer, General Counsel Jennifer Abruzzo, issued a memorandum instructing regional offices to send cases relating to numerous issues to her office for consideration, including decisions considering the legality of work rules under the Boeing Co. standard. Beyond that, however, General Counsel Abruzzo also directed regional offices to send cases considering whether workers were properly classified as independent contractors under SuperShuttle DFW, Inc.

Thus, it is no surprise that in the last few weeks, the Board issued decisions in which it invited parties and amici to submit briefs relating to both issues: (1) the future of the handbook and rules standards set out in Boeing Co. and later cases, and (2) the appropriate standard for determining whether an individual is an employee or an independent contractor. While the invitations assume the Board will give due consideration to all views relating to these standards, Chair McFerran’s previous views and General Counsel Abruzzo’s agenda make the end-results all but certain. The pendulum is unstoppable.

Handbook and Workplace Rules

In 2017, the Trump Board established a new framework for evaluating the legality of employer handbook rules and other workplace policies. According to Boeing Co., if a facially neutral rule may, when reasonably interpreted, potentially interfere with rights under the Act, the Board will evaluate both the nature and extent of the potential impact on employee rights and legitimate justifications associated with the rule. The Board developed three categories of work rules and the appropriate framework for their review. The standard essentially expanded the types of rules the Board might find lawful and made it easier for employers to tailor their rules to fit their needs. After Boeing Co., the Trump Board issued separate decisions holding that certain types of rules are always lawful, including investigative confidentiality rules, non-disparagement rules, and rules prohibiting outside employment.

The fundamental flaw with Boeing Co., according to Chair McFerran, “is that it permits employers to maintain rules that reasonably tend to chill employees in the exercise of their rights under the Act, while failing to require that employers narrowly tailor their rules to serve demonstrated, legitimate interests.” Thus, Chair McFerran has envisioned a world where the Board will return to the 2004 Lutheran Heritage Village-Livonia standard, which held that a workplace rule that did not explicitly restrict employee rights would still be found unlawful if employees would reasonably construe it that way.

The invitation for briefs sought views about the future of Boeing Co., whether and how the current standard should be modified, and whether the Board should continue to hold that certain categories of work rules, like those described above, are always lawful.

Independent Contractor Standards

By way of background, the Act excludes independent contractors from statutory coverage. The Board has traditionally relied on common law agency principles to determine whether an individual is an employee or an independent contractor.

In 2014, the Obama Board refined this traditional test by creating a new factor to be considered in the analysis -- whether the employer could prove that the putative contractor was providing services as part of an independent business -- and viewed entrepreneurial opportunity as just one aspect of that factor. Further, the Board stated that only actual, rather than theoretical, entrepreneurial opportunity should weigh in favor of a finding that an individual has been properly classified as an independent contractor. The Board also found it important to evaluate whether the company could prevent the individual from engaging in entrepreneurial opportunities. Ultimately, this standard made it more difficult for an employer to prove that an individual was an independent contractor and, thus, excluded from the Act.

In 2019, however, the Trump Board in SuperShuttle DFW, Inc., 367 NLRB No. 75 (2019), returned to the long-standing independent contractor standard, reaffirming its adherence to the traditional common-law agency test. This standard arguably makes it easier for an employer to classify workers as independent contractors.

In the notice, the Board invited parties and amici to submit briefs relating to the future of SuperShuttle DFW, Inc., whether to return to the 2014 standard, and whether some other standard should replace both. Notably, General Counsel Abruzzo’s memorandum also suggests that the simple act of misclassifying a worker as an independent contractor can be an unfair labor practice (although current Board law says otherwise).

Next Steps for Employers

Chair McFerran might be telegraphing her punches, but they undoubtedly will land. Given President Biden’s promise to be the “strongest labor President you have ever had,” employers should anticipate the Board either returning to Obama-era standards or adopting new standards that are even more labor friendly than we have seen in recent history.