Court Rejects NLRB’s Decision that Company Uniforms Are Presumptively Unlawful

Employers have watched with dismay as the National Labor Relations Board, under an admittedly pro-union President, issued opinions and rules that significantly promote the interests of unions over those of employers. The Board’s actions, however, may be challenged in court, and the U.S. Court of Appeals for the Fifth Circuit has now rejected a Board opinion that found company uniforms presumptively unlawful.

Background of the Case. In Tesla v. NLRB, Tesla’s team-wear policy required production associates to wear black Company-issued clothes or, with supervisory approval, all-black clothing, while supervisors and inspectors wore red and white shirts. This was to allow “visual management” to distinguish among different types of employees, to ensure that workers were in their proper work area, and to verify that only employees were present in the production area. The policy also specified that clothing must be “mutilation free,” meaning that it could not possibly cause damage (e.g. scratches, dings, chips, etc.) to a vehicle during the manufacturing process.

During the UAW’s unionization drive in 2017, production associates began wearing black UAW shirts. A few months later, following the discovery of several mutilations, Tesla began to enforce its dress code by informing employees that the UAW shirt violated policy and employees would be sent home if they wore non-conforming shirts again. Tesla did permit employees to wear union stickers on their work apparel. The union charged Tesla with unfair labor practices, arguing that the policy violated employees’ rights to engage in union-related activity under the National Labor Relations Act.

The NLRB’s Position on the Display of Union Insignia. As we discussed in our September 1, 2022 E-lert, in Tesla, Inc. (the first precedent-shifting decision under the Biden Administration), the Board held that an employer’s interference with an employee’s display of union insignia on their apparel is presumed to be unlawful unless the employer can demonstrate “special circumstances” to justify the interference. Special circumstances are found when the display jeopardizes employee safety, equipment or product safety, or unreasonably interferes with a public image that the employer has established as part of its business plan.

Under the Board’s 2019 ruling in Wal-Mart Stores, Inc., the “special circumstances” test applied only when an employer completely prohibited union insignia, and that certain size-and-appearance restrictions on union insignia could be lawful based on less compelling employer interests. However, the Biden Board in Tesla, Inc. asserted that the special circumstances test applied to any restriction, and not just total bans. This effectively meant that company uniform requirements were presumptively unlawful. Tesla then appealed the Board’s ruling to the Fifth Circuit.

The Fifth Circuit’s Decision. In rejecting the Board’s “extremely broad” apparel rule, the Fifth Circuit found that “the Board has exceeded its statutory authority in crafting the rule.” Instead, the Fifth Circuit endorsed the Wal-Mart approach as to when the “special circumstances” test should apply (i.e., only where there has been a complete ban on the display of union insignia).

The Fifth Circuit primarily based its ruling on its finding that ‘the Board failed to balance properly the competing interests ‘of self-organization’ and the ‘right of employers to maintain discipline in their establishments.’” Instead, the Board “elevated employee interests at the expense of legitimate employer interests.” The Fifth Circuit found that, in order to invalidate a dress ban, the Board must show that the policy “truly diminished the ability of the labor organizations involved to carry their message to the employees,” which the Board did not do here.

In particular, the Fifth Circuit noted the policy justifications for company uniforms, which it adopted from the Ninth Circuit: “that a ‘uniform requirement fosters discipline, promotes uniformity, encourages esprit de corps, and increases readiness’ and [that] having ‘standardized uniforms encourages the subordination of personal preferences and identities in favor of the overall group mission.’” These justifications were ignored by the Board.

Lessons for Employers. This decision is good news in that it upholds the ability of employers to enforce reasonable dress code requirements, including company uniforms, as long as the dress code does not totally prohibit the display of union insignia – absent special circumstances. But more generally, it also reinforces the fact that the power of the NLRB is not without bounds, and that federal courts, which are less subject to the whims of changing administrations, may provide a check on government agencies.