Non-Compete Agreements Survive Labor Board Scrutiny — For Now

by Burr & Forman

The National Labor Relations Act (the “NLRA”) has always applied to both unionized and non-unionized workplaces.  However, one of the priorities of President Obama’s appointees to the National Labor Relations Board (the “Board”) has been to maintain the NLRA’s relevance in today’s workplaces.  With union representation at historically low levels, this priority means making sure that the NLRA rights of employees in non-unionized workplaces are being protected.  For example, the Board has made clear that non-unionized employers’ “social media” policies can violate the NLRA — after all, such policies could, in theory, discourage employees from sharing (critical and unkind) thoughts about their employers online.  Likewise, the Board has said that mandatory arbitration agreements may violate the NLRA if such policies do not specifically inform employees of their rights to file unfair labor practice charges with the Board.  As might be expected, the Board’s latest decisions (and even the composition of the Board itself) have been challenged in numerous court cases, so all of this is something of a “moving target.”

Given current trends, it is natural to ask whether non-compete agreements might be next among common employment policies to be scrutinized by the Board.  The answer, for now, is no.  In 2012, the Director of Region 19 (covering parts of the Pacific Northwest) asked the Board’s Office of General Counsel for advice as to whether an insulation-installation company’s mandatory employment agreement — and in particular the non-compete and anti-moonlighting provisions of this agreement– might violate the NLRA.  Apparently, a union (the Heat and Frost Insulators and Asbestos Workers) had been trying to organize at this particular employer for some time.  The concern was whether the employer’s mandatory employment policies could interfere with union “salting.”  (A union “salt” is a job applicant who applies for work at a particular employer for the purpose of organizing the employer and who will, after being hired, try to persuade her co-workers to support the union.)  Because union “salts” may move from one workplace to another (and may also be on the union’s payroll), having an anti-moonlighting policy and a non-compete agreement could, in theory, interfere with “salting.”

The Office of General Counsel answered that, as to the non-compete provisions, these provisions “interfere[d] with employment in general,” but their effect on NLRA rights in particular was “too attenuated” to violate the NLRA.  The Office of General Counsel was, however, a little more skeptical about the anti-moonlighting provisions, especially if there might be evidence that such policies were discriminatorily enforced against union members.  For example, although a consistently-enforced policy barring the hiring of any job applicant currently on the payroll of some other employer (including a union) does not, in itself, violate the NLRA, an employer cannot suddenly adopt an anti-moonlighting policy for the purpose of weeding out union “salts” from other job applicants.  Thus, the Office of General Counsel suggested that the regional office investigate further the employer’s motivation for adopting the anti-moonlighting policy and the history of the employer’s enforcement of its policy.

In conclusion, an anti-moonlighting policy could, if adopted to keep the union out or enforced in a discriminatory fashion against union members, violate the NLRA, but for the moment, straight non-compete agreements have survived Board scrutiny.

If you would like additional information on trade secrets law, please contact one of the Burr & Forman Non-Compete & Trade Secrets team members.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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