NLRB Advice Memoranda, STAR CRANE & HOIST, DIVISION OF LIFT SOLUTIONS, National Labor Relations Board, (Dec 27, 2024)

From: ​     ​@nlrb.gov>

Sent: Friday, December 27, 2024 11:15 AM

Subject:, Case no. 09-CA-336248, Case Closing Email

This case was submitted for Advice regarding whether a provision restricting the Charging Party from soliciting the Employer's customers violates Section 8(a)(1). We conclude, under all the circumstances, that there is insufficient evidence that the proffer, maintenance, or enforcement of the provision violated the Act. Accordingly, the Region should not include the non-solicitation provision in the complaint.

Star Crane & Hoist, Division of Lift Solutions (“Star Crane”) is in the businesses of overheard crane and lift services and sales. In brief, the Charging Party began ​     ​ employment with Star Crane in ​     ​. Toward the end of ​     ​ time there ​     ​ worked as a ​     ​, and ​     ​ compensation was based in part on commission. In ​     ​ 2023, due to changes in the commission structure that ​     ​ believed would reduce ​     ​ income, ​     ​ began seeking new employment and was offered a job with Central Industrial Services Ground (“CISG”), one of the employer's competitors. When ​     ​ informed Star Crane that ​     ​ was leaving, Star Crane asked ​     ​ if there was anything the company could do to keep ​     ​. In response, ​     ​ said ​     ​ wanted to work under the former commission structure, and Star Crane agreed. As a condition of continued employment under that commission structure, Star Crane required that ​     ​ sign an agreement whereby ​     ​ could not disclose ​     ​ compensation details to other Star Crane employees. [1]

In ​     ​ 2023, after expressing concern about purported “hidden fees” that were inflating the cost to customers and making it harder to hit ​     ​ sales goals, the Charging Party reached back out to CISG about the position ​     ​ was previously offered. On 2023, the Charging Party put in ​     ​ two weeks' notice to Star Crane and informed the ​     ​ that ​     ​ was going to work for a competitor. In response, Star Crane told ​     ​ that ​     ​ resignation had to be effective immediately and that the reason was ​     ​ near constant contact with customers. Star Crane presented ​     ​ with a separation agreement which provided that ​     ​ would “refrain from soliciting any of the company's customers and will refer customers back to the company, if the customer makes contact directly.” As reflected on the separation agreement, the Charging Party negotiated a change in ​     ​ paid time off payout from ​     ​ hours, but claims not to have noticed the non-solicitation language. ​     ​ signed the agreement which made separation effective ​     ​ 2023.

On ​     ​ 2023, the Charging Party sent a mass email to 49 individuals with the subject line “Important Information Confidential,” copying the owner of CISG (“CISG Owner”). The 49 individuals worked for major customers of Star Crane, whose contact information the Charging Party had because ​     ​ managed the ​     ​ for those companies. The email stated that, since Star Crane had been acquired by a larger crane company, its prices had gone up and that “the repairs are marked up ​     ​ and [there are] hidden fees that you don't see.” ​     ​ further stated that ​     ​ and the ​     ​ were “both honest people and feel that we do not want to become ‘that’ crane company, so it is best that we have a home that feels the way we do.” ​     ​ wrote that repairs were costing the customers of Star Crane ​     ​ on markup and that CISG would offer across the board” with only “a ​     ​ markup on parts and NO hidden fees.” ​     ​ attached a W-9 and an application form and noted that ​     ​ had the companies' “schedule of when your inspections are due again” and that ​     ​ would send them quotes “prior to scheduling” if the customers were “on board” with CISG.

Star Crane sent a cease-and-desist letter on ​     ​ 2023 to the Charging Party and the ​     ​ arguing that the Charging Party was in breach of the separation agreement and that the email constituted a common law tort including tortious interference with contract and unfair competition. The letter demanded that CISG assure Star Crane that the Charging Party “will no longer work in a capacity that could be considered in competition with Star Crane or would inevitably require ​     ​ to disclose Star Crane's confidential information.” The letter further demanded that CISG cease and desist from pursuing the customers that the Charging Party “improperly contacted” in ​     ​ 2023 email.

The parties agreed initially to try to work out a settlement and, in the meantime, agreed that the Charging Party would not have any contact with any former customers of Star Crane. During negotiations, Star Crane maintained that it was not asking for the Charging Party to be terminated, but instead asking that CISG “inform Star Crane what steps it has taken to ensure … [the Charging Party] does not interact with any Star Crane customers…” During the negotiations, Star Crane represented that the Charging Party was continuing to reach out to former customers despite the parties' agreement, though the Charging Party maintains that ​     ​ was not.

On ​     ​ 2024, CISG terminated the Charing Party's employment. The ​     ​ stated that CISG could not afford both the Charging Party's salary and the attorney's fees was paying because of the dispute with Star Crane.

In attempting to gain new employment in the crane industry, the Charging Party divulged the existence of ​     ​ non-solicitation agreement with Star Crane as well as the circumstances surrounding the threats of litigation during ​     ​ employment at ​     ​ CISG. ​     ​ was not able to obtain employment in the crane industry and now works in a different field.

Analysis

In Memorandum GC 23-08, Non-Compete Agreements that Violate the National Labor Relations Act, dated May 30, 2023, the General Counsel explained that non-compete provisions are overbroad when they could reasonably be construed by employees to deny them the ability to quit or change jobs by cutting off their access to other employment opportunities that they are likely most qualified for based on their experience, aptitudes, and preferences. Memorandum GC 23-08, at 3-4. The memo also identified five specific types of protected activity chilled by such non-compete provisions: concertedly threatening to resign to improve terms of employment, carrying out such threats, soliciting coworkers to go work for a local competitor as part of a broader course of protected concerted activity, concertedly seeking or accepting employment with a local competitor to obtain better working conditions, and being paid to organize a given employer's employees. See id.; Berry Green Management, Inc., 07-CA-296276, Significant Advice Memorandum dated Apr. 26, 2023, at 5-21. Such provisions are unlawful unless narrowly tailored to any special circumstances outweighing their infringement on employee rights.

In contrast, employers do have a legitimate interest in preserving their customer base, but prohibitions on post-employment solicitation of customers in some instances can constitute de facto non-compete agreements where they effectively cut off employees' access to job opportunities in their field. Accordingly, we have found prohibitions on post-employment solicitation of clients to be lawful where they are for a reasonable period and the industry is not so small that such a ban would foreclose similar employment with other employers. See ​     ​. By contrast, we have found such prohibitions unlawful where they operate for an unreasonable duration and preclude working with or having access to customers that no longer have a business relationship with the employee's former employer. See ​     ​.

Here, there is insufficient evidence to conclude that the prohibition on soliciting Star Crane's customers operated to cut off the Charging Party's access to other employment opportunities in the crane industry. While the non-solicitation provision is potentially concerning given its unlimited duration, there is insufficient evidence to conclude that the industry is so small that the provision, standing alone, would preclude ​     ​ from gainful employment. Indeed, the Charging Party did obtain gainful employment in the crane sales industry which Star Crane did not initially object to. It was only when Star Crane learned that ​     ​ had solicited its customers in a mass email, relying on pricing, scheduling, and contact information that ​     ​ knew because of ​     ​ former position with Star Crane, that the company objected to ​     ​ conduct. Nor did Star Crane insist on termination even after ​     ​ engaged in this conduct, suggesting the true purpose of ​     ​ the provision was to prohibit the Charging Party from soliciting customers ​     ​ had worked with and not to limit the Charging Party's opportunity for gainful employment in the industry. There is also insufficient evidence to conclude that the provision, standing alone, and not the Charging Party's conduct or the ensuing legal dispute, is what made it difficult for ​     ​ to obtain employment in the crane industry after ​     ​ termination from CISG.

Importantly, the provision is limited to Star Crane's current customers, not former or potential customers, and it does not restrict the Charging Party from working with those customers at all in the future, only soliciting them. ​     ​. While the second clause directs the Charging Party to refer customers who contact ​     ​ back to Star Crane, this appears intended only to require the Charging Party to inform the customer that ​     ​ no longer works for Star Crane and to provide the customer with a point of contact. It could not be interpreted to prohibit working with those customers at any point in the future. Accordingly, we conclude that the proffer, maintenance, and enforcement of the provision restricting customer solicitation did not violate the Act.

This email concludes this case in Advice. Please reach out with any questions or concerns.

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Attorney, Division of Advice

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