In this sentence, I think that le refers to rez-de-chaussée. They simply want to say that the rez-de-chaussée cannot be designated as an étage. You can say 1er étage, 2e étage but l’étage du rez-de-chaussée would be false. The rez-de-chaussée is not an étage.

I found some advises/directives from the Swiss administration for this.

Numérotation de
l’étage Les étages sont par principe désignés par un numéro croissant (de 0 à
89). La désignation de l’étage n’est cependant pas attribuée au
rez-de-chaussée car la numérotation ne peut pas commencer par un
zéro.

Dans un bâtiment, l’étage est en élévation au-dessus du rez-de-chaussée et ne peut le désigner.

I would translate it by “In a building, ‘étages” are elevated above the ground floor, which they cannot designate.” I.e., an “étage” is above the ground floor but the ground floor is not an “étage”. You could translate ”étage” by “floor”, but they aren’t exactly the same thing and it would make little sense to by that the ground floor is not a floor.

The term “storey” might be more accurate to translate “étage” as it excludes the ground floor, although it seems it is sometime used to designate basements, which are not called “étages” in french.

The “premier étage” in particular is not what the american call “first floor“.

Architects often use the word “niveau” (“level”), which include both “étages” and “rez-de-chaussé” (and “sous-sols”, “entresol“, “rez-de-jardin“, etc.).

Un triplex est un appartement qui s’étend sur trois niveaux.

Because one of those levels could be the ground floor, you shouldn’t use “étages” here.

So in short: an “étage” is a floor which is above the ground floor excluding the ground floor. It is, in particular, not a basement.

The first clause is about the concept of étage, while the second clause is about the word étage. It’s a bit confusing, I had to read the sentence twice and I’m a native speaker.

Dans un bâtiment, l’étage est en élévation au-dessus du rez-de-chaussée.

In a building, an étage is somewhere above the ground floor. The word étage means a floor that is above ground level, unless the context strongly indicates otherwise. For example, in a two-storey building, you could say “je suis au rez-de-chaussée” or “je suis en bas” to mean “I’m downstairs”, and “je suis à l’étage” or “je suis en haut” to mean “I’m upstairs”. If you say that a house has “un étage”, it means it has a floor above the ground floor: it’s a two-storey building. The premier étage is the first floor above the ground floor (like British usage, and unlike American usage). Note that Québec tends to follow American usage.

L’étage […] ne peut le désigner.

Le refers to le rez-de-chaussée. This clause means that the word étage cannot be used to mean the ground floor. It isn’t that the étage cannot be designated, but that étage cannot designate the rez-de-chaussée.