In a new memorandum, the General Counsel of the National Labor Relations Board (NLRB) stated that restricting employees from holding outside or secondary employment is a violation of federal labor law.
The issue arose when a regional office asked for input on three provisions of an employment agreement, including a “Duties of Employees” provision which read:
“Except as hereinafter provided, the Employee shall at all times during the continuance of this Agreement devote her full time to the conduct of the business of the Employer and shall not directly or indirectly, during the term of this Agreement engage in any activity competitive with or adverse to the Corporation’s business or welfare whether alone, or as a partner, officer, director, Employee, advisor, agent or investor of any other individual corporation, partnership, joint venture, association, entity or person.”
The provision was unlawfully overbroad pursuant to Stericycle, Inc., the GC said, because it would have a reasonable tendency to chill employees in the exercise of their Section 7 rights under the National Labor Relations Act (NLRA).
In Stericycle, the Board built upon the standard used in Lutheran Heritage Village-Livonia, and held that when analyzing work rules, the NLRB must prove that an employer’s rule has a reasonable tendency to chill employees from exercising their Section 7 rights.
“If an employee, who is understood to be economically dependent on the employer and who contemplates Section 7 activity, could reasonably interpret the rule to be coercive, the General Counsel has carried their burden and the rule is presumptively unlawful even if there is also a reasonable non-coercive interpretation,” the GC wrote.
An employee could reasonably read the provision as preventing him or her from engaging in outside employment while employed by the employer because of the restriction on being an “employee” of another entity.
“The General Counsel takes the position that rules or contract provisions directly or indirectly prohibiting moonlighting are generally unlawful, and the Board has expressed an intent to revisit extant law concerning an employer’s maintenance of moonlighting restrictions,” the GC wrote. “Thus, rules or contract provisions that broadly prohibit outside employment implicitly prohibit, among other things, working as a paid union salt.”
In the case discussed, because the employer did not seek to enforce this provision of the employment agreement, the employee’s charge did not properly allege a violation based on the Duties of Employees provision.
However, the memo noted that the employer admitted that the provision was in effect for several other current employees, “underscoring the appropriateness of applying Stericycle generally.”
To read the GC’s memo, click here.
Why it matters
Employers should pay attention to the GC’s position that rules or provisions directly or indirectly prohibiting moonlighting are generally unlawful, and the warning that the NLRB has expressed interest in tackling the issue.