NLRB Advice Memoranda, RUSH Construction, Inc., National Labor Relations Board, (May 1, 2024)

The Region submitted this case for advice because it involves a non-compete agreement. See Memorandum GC 23-08, Non-Compete Agreements that Violate the National Labor Relations Act, dated May 30, 2023. We conclude that under the specific circumstances of this case, the Shareholder Agreement containing the non-compete agreement was entirely voluntary and therefore this case is not an appropriate vehicle in which to pursue a theory based on GC 23-08. The Region should dismiss this allegation, absent withdrawal.

The Employer operates a construction company and provides general contracting, design/build, and other services to customers in a variety of industry settings. The Employer has an employee shareholder program where after working for the Employer for a certain amount of time, a worker can opt into the program and purchase shares to become a shareholder of the company. Only employees of the Employer can become shareholders, and they must sell their shares if they cease working for the Employer. Shareholders attend quarterly meetings regarding the operation of the company and may receive profit distributions based on the performance of the company. As a condition of becoming a shareholder, the Employer requires the individual to sign a Shareholder Agreement, which contains a non-competition agreement, non-solicitation clause and a nondisclosure clause. The provisions in the agreement continue in effect for three years after the shareholder sells their shares, whether or not they are still working for the Employer.

The Charging Party became a shareholder in ​     ​, after beginning ​     ​ employment with the Employer in ​     ​. still owned shares at the time of ​     ​ termination on ​     ​, 2023. After ​     ​ termination, the Employer found out that the Charging Party was seeking to bid for work on behalf of ​     ​ new employer regarding one of the Employer's previous clients. The Employer sent letters to the new employer stating that the Charging Party was subject to the restrictive covenants in the Shareholder Agreement and that the Employer would take legal action as appropriate.

We conclude that the non-compete agreement in the Shareholder Agreement is not the type that the General Counsel was concerned about in GC 23-08. [1] In GC 23-08, the General Counsel discussed the chilling effect of non-compete agreements on employee rights under Section 7 when an employer requires “their employees to sign non-compete agreements to obtain or keep their jobs, or as part of severance agreements.” GC 23-08 at 1. When the provision is in an agreement that an employer requires as a condition of employment, we have treated the agreement like a work rule. See e.g., ​     ​ Severance agreements, in turn, are analyzed pursuant to McLaren Macomb, 372 NLRB No. 58 (2023). See GC 23-08 at 2 n.6.

Here, the Charging Party was not required to become a shareholder in order to keep ​     ​ job and the shareholder program was not operated as part of the employee's compensation package. There is no evidence that all eligible employees participated in the program or were encouraged to do so by the Employer. In fact, there is evidence that at least one individual chose to sell ​     ​ shares back to the Employer and the non-compete and other restrictive covenants in ​     ​ Shareholder Agreement were voided. Additionally, an employee choosing whether to participate in the Employer's shareholder program is not facing a “particularly vulnerable time,” such as employees offered voluntary severance agreements. Cf. McLaren Macomb, 372 NLRB No. 58, slip op. at 10 n.51 (in distinguishing severance agreements from work rules, the Board noted that severance agreements are coercive in part because an employee is offered the agreement when they are already facing job loss). [2] Here, the employee still has their job, their full panoply of Section 7 rights including access to other employment opportunities, and the ability to become a shareholder in the future should they change their mind. In light of these circumstances, we find that the Shareholder Agreement is not coercive in the manner contemplated by GC 23-08. Given our conclusions herein, we would not find the non-solicitation or non-disclosure agreements contained in the Shareholder Agreement unlawful. Therefore, the Region should dismiss this allegation, absent withdrawal.

This email closes this case in Advice. Please contact us with any questions or concerns.

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