In various industries across the country, it has become increasingly common for employers to require employees to sign noncompete agreements that restrict their employees’ ability to compete against the employer and/or solicit the employer’s customers upon leaving the employer’s employ. And employers have become increasingly savvy in drafting noncompete agreements that are reasonable in time, geographic scope, and industry. Indeed, there has been substantial litigation over these issues in jurisdictions nationwide.
But what if the employer has a unionized workforce? Can the employer still individually require employees to execute noncompete agreements without negotiating with the union?
Perhaps not. On Friday, a three-judge panel of the U.S. Court of Appeals for the District of Columbia unanimously rejected an employer’s contention that it could unilaterally impose a noncompete and confidentiality agreement without negotiating with the union. Instead, the appellate court agreed with the National Labor Relations Board that doing so may violate federal law. See Minteq Int’l, Inc. v. NLRB, 2017 WL 1521553 (D.C. Cir. April 28, 2017).
In 2012, Minteq started requiring new employees to sign a Non-Compete and Confidentiality Agreement (NCCA). At that time, however, Minteq’s employees were represented by the International Union of Operating Engineers, Local 150, AFL-CIO and covered by a collective bargaining agreement (“CBA”). Nonetheless, despite its unionized workforce and governing CBA, Minteq didn’t give the union notice or an opportunity to bargain regarding requiring new employees to sign the NCCA. Therefore, in 2014, the Union filed an unfair labor practice charge against Minteq for its failure to bargain with the Union over the NCCA. After proceedings before an ALJ and an appeal by Minteq, in 2016, the Board held that the NCCA was a mandatory subject of bargaining not covered by the parties’ CBA. Therefore, it held that Minteq violated the Fair Labor Standards Act by implementing it without first bargaining with the Union. The NLRB concluded that Minteq violated section 8(a)(1) and (5) of the FLSA because Minteq failed to afford the employees’ union notice or an opportunity to bargain over its unilateral implementation of the requirement that employees sign the agreement.
The Court agreed, concluding that the NCCA was a mandatory subject of bargaining and that imposing the NCCA requirement on hiring was an unfair labor practice. “It was therefore unlawful for Minteq to unilaterally implement the entire NCCA.”
Although the Court’s determination was driven in large part by the NCCA at issue and the CBA in effect at Minteq, employers with unionized workforces or otherwise applicable CBAs would be wise to closely scrutinize their agreements and governing law under the FLSA before instituting non-compete agreements. Proactive analysis and planning may permit employers to achieve their desired results without running afoul of the FLSA and engaging in unlawful labor practices.