It has always been clear that non-compete agreements between an employer and its bargaining unit employees are a mandatory subject of bargaining, but it has never been clear that the same is true for agreements between an employer and a third-party limiting the third-party’s ability to hire the employer’s unionized employees. However, employers finally received some (non-binding) clarity in the form of an Advice Memorandum from the National Labor Relations Board’s Office of the General Counsel, in which the Division of Advice concluded that an employer has no obligation to bargain over its decision to include limitations on its third-party contractors’ ability to hire and use former unit employees.

In Duke Energy Indiana (Case 25-CA-214176), the union represented the employer’s linemen who constructed and maintained the employer’s power lines and other equipment. The employer also used subcontracted linemen consistent with the terms of the parties’ collective bargaining agreement, and the union represented many of the linemen working for the subcontractors. However, many of the employer’s linemen found that working for the subcontractors through the union’s hiring hall offered better wages and benefits, and thus terminated their employment and began working through the hiring hall for the subcontractors. Looking to stem the tide of linemen leaving, the employer began enforcing contractual provisions in the agreements with its subcontractors prohibiting them from soliciting the employer’s linemen. In response the union filed an unfair labor practice charge alleging that the employer had an obligation to bargain over the implementation and enforcement of the non-solicitation provision in the agreements with the subcontractors.

In the Advice Memorandum, the Division of Advice acknowledges that the Board and the courts have never directly addressed the question presented in Duke Energy, specifically whether an employer must bargain over the terms of a contract that it enters into with another business entity where the terms of that contract would vitally affect unit employees. As a result, the Division of Advice turned to the Supreme Court’s decision in First National Maintenance Corp. and its progeny for guidance:

“Congress had no expectation that the elected union representative would become an equal partner in the running of the business enterprise in which the union’s members are employed.” An employer “must be free from the constraints of the bargaining process to the extent essential for the running of a profitable business.” Thus, the Board has recognized that managerial decisions that may impact employees but concern issues that “lie at the core of entrepreneurial control” are not mandatory subjects of bargaining and fall solely within the employer’s prerogative. Moreover, the Board has recognized that “the autonomy of employers in their selection of independent contractors with whom to do business” is one of the legislative policies underlying the Act.

Consequently, despite finding that the employer’s unilateral implementation of the non-solicitation provision with the third-party subcontractors had a vital impact on unit employees, the Division of Advice concluded that an employer’s decision to include limitations on its third-party contractors’ ability to hire its employees is the type of managerial decision over which the employer does not have to bargain:

The Employer and the Union have engaged in bargaining over the Employer’s ability to subcontract unit work, as evidenced by the subcontracting terms set forth in the parties’ collective-bargaining agreement, and the Union is free to seek different subcontracting terms in negotiations for any successor agreement. What the Union cannot do is force bargaining over the terms of the Employer’s contracts with its subcontractors.