In its recent ruling on the case involving the metals manufacturer Minteq International, Inc., the National Labor Relations Board (NLRB) continued its expansion of employee rights by finding that two common provisions in a non-compete agreement were “unlawfully overbroad rules” that interfered with employees’ rights in violation of Section 8(a)(1) of the National Labor Relations Act (“the Act”).
By way of background, a union represented some of Minteq’s employees. The collective bargaining agreement contained a probationary period for employees for their first six months of employment, and after six months, a “just cause” standard was imposed for any discipline, suspension, or discharge. Minteq began requiring that new employees sign a Non-Compete and Confidentiality Agreement (NCCA), which contained various provisions, including an “Interference with Relationships” rule, an “At-Will-Employee” rule, and a “Confidential Information” rule. Of significance to both unionized and union-free employers, the NLRB held that the “Interference with Relationships” provision and the “At-Will Employee” provision were unlawfully overbroad rules.
In its lengthy decision, the NLRB explained that, under Section 7 of the Act, employees are permitted to communicate with customers about terms and conditions of employment for mutual aid or protection. However, according to the NLRB, the prohibitions on interfering with customer relationships in the “Interference with Relationships” provision was illegal because it could be construed to prohibit such activity. With respect to the “At-Will Employee” rule, the NLRB found that the provision had a reasonable tendency to discourage employees from engaging in conduct that would be protected by Section 7 of the Act.
Surprisingly, the NLRB found that the “Confidential Information” rule was lawful. The provision defined confidential information, and then further buttressed it with examples, which illustrated its scope and meaning. The NLRB emphasized that a prohibition must not be read “in isolation,” and the phrase containing this prohibition “does not stand alone and must be read in context.” Therefore, when considered in this context, the NLRB determined that employees reading the rule “would reasonably understand it to refer to the preceding examples of proprietary information,” rather than information related to wages or working conditions.
Overall, the decision in Minteq demonstrates the NLRB’s continued attack on employer policies on grounds that employees might interpret such policies to bar or restrict their right to engage in protected activities. The NLRB’s analysis of the Non-Compete and Confidentiality Agreement in this case also impacts the drafting of employee handbooks.
Over the last several years, the NLRB has been aggressively reviewing and policing employee handbooks that it believes “chill” employee rights under the NLRA, the National Labor Relations Act. For Dunkin’ Donuts franchisees, employee handbooks are an important source for communicating your company’s policies and procedures. We recognize that most employers do not draft their handbooks with the object of prohibiting or restricting conduct protected by the NLRA, but, even well-intentioned rules can be found unlawful if employees would reasonably construe the rule’s language to prohibit Section 7 activity. Determining what language employees would “reasonably construe” as prohibiting Section 7 activity is certainly a challenge.
Although we do not necessarily recommend that you follow its guidance given that it was issued by a government employee with a decidedly pro-union bent, the NLRB General Counsel also issued a 30 page memorandum in which he explained and provided examples of employer rules/policies that were found to be lawful or unlawful. While following the examples set forth in the memorandum may be safe, they do not necessarily portray the real state of the law. And with a new president, we expect his nominees to the NLRB to shift the state of the law back to the right as cases come before them.
Nonetheless, the General Counsel’s memorandum and the NLRB’s decision in Minteq both convey an important message to employers that can be applied to the drafting of handbook rules and policies: the language must not be read in isolation, but instead be read in the context of the employer’s practices, other policies and procedures. As such, you should have experienced labor law counsel review your company’s handbook rules and policies in order to avoid unintended and unfavorable interpretations of specific provisions.
Importantly, your handbook should contain clear drafting, including illustrations, examples, and limiting or clarifying language, which refers to your company’s practices and other relevant policies and procedures. As a good rule of thumb, keep in mind that context matters. •
Peter Bennett is president of the Bennett Law Firm. Ashley Arra is an associate at the firm, which specializes in labor and employment law.