Wisconsin Supreme Court Strikes Down "No-Hire" Provision Governing Temporary Employees
More of your employees may be supervisors than you might think and they may be supervisors in ways which might surprise you. Reconsidering whether some of your employees are supervisors could pay significant dividends for you as an employer. In a wave of recent court and agency rulings, the number of employees being counted as "supervisors" under the National Labor Relations Act has expanded dramatically.
Traditionally, most employers concluded that supervisors must have the authority to hire, fire, discipline and otherwise directly affect the wages or working conditions of fellow employees. But it is now clear that individuals who "responsibly direct" others may also be supervisors under the Act - even if they do not also have the authority to hire, fire or discipline.
The battle over the supervisory status of individuals who direct but do not hire or fire lower level employees has been waged on many fronts. A number of court and agency decisions have involved registered nurses in a nursing home setting. Similar issues have been litigated with respect to television producers, barge pilots, and other occupations.
Unions and employers alike are waging these battles to achieve their own goals. In some cases, a union seeks to include arguable supervisory employees in a representation election and the employer objects on the ground that the employees are supervisors. In other settings, employers that historically included these individuals in a bargaining unit are filing unit clarification petitions seeking to take them out of the unit. In many of these cases, courts around the country have rejected the National Labor Relations Board's traditional analysis that such individuals are not supervisors.
The U.S. Supreme Court Weighs In ...
On the national level, the United States Supreme Court recently took up this topic in resolving a case regarding the status of registered nurses at a residential care facility. NLRB vs. Kentucky River Community Care (decided 5/29/01). As we reported in Practical Guide #32 (available online at www.quarles.com), the nurses in Kentucky River directed the work of nursingassistants but did not hire, fire, discipline, evaluate, or otherwise play a role in the terms and conditions of the nursing assistants' employment. The NLRB had concluded that these nurses did not exercise sufficient independent judgment to qualify as supervisors, since they simply relied on their "ordinary professional or technical judgment" in directing lower level employees.
The Supreme Court categorically rejected the Board's analysis, concluding instead that these nurses clearly met the Act's definition of a supervisory employee because they did "responsibly direct" the work of lower level employees #151; using independent judgment and exercising their authority in the interest of the employer while doing so. As the Court noted: "What supervisory judgment worth exercising . . . does not rest on 'professional or technical skill or experience'?"
... And the Board's Regional Offices Get the Message
Most recently, Quarles & Brady LLP persuaded Region 30 of the National Labor Relations Board in Milwaukee to reject an election petition brought by a union seeking to represent individuals who are supervisors under the Supreme Court's Kentucky River Community Care analysis. These individuals, who held the title of "Distribution Control Supervisors," work for an electric utility.
These employees' primary duty is to design and direct "switching activities" on the utility's electrical distribution system so that portions of the system can be de-energized for repair work. Although these supervisors have no authority to hire, fire, evaluate, or discipline field crews, the utility relies upon their professional and technical experience to safely design and implement switching orders. Furthermore, the utility's field crews must follow these supervisors' directions to safely perform their work.
Region 30 of the Board concluded that Kentucky River Community Care supplied the proper analysis to determine whether the Distribution Control Supervisors were, as the utility contended, supervisors. In relying on the Supreme Court's decision, the Regional office rejected prior Board decisions stating that distribution control supervisors are not supervisors under the Act. Instead, the Region concluded that prior Board law was no longer valid in light of the Supreme Court's 2001 decision. NLRB Case No. 30-RC-6489 (decided October 11, 2002).
Lessons for Employers
In the wake of Kentucky River Community Care, employers stand to reap enormous benefits from taking a fresh look at the status of lead workers, administrators, and other employees who - even though they may currently be included in collective bargaining units - might actually be supervisors under the Act. Whatever their actual title, employees who are responsible for directing lower level employees and who utilize independent judgment in doing so may well be supervisory employees - even if they have no direct reports and do not participate in hiring and firing decisions.
Clarifying the status of who is a supervisor may not only affect the size and continued viability of a current bargaining unit. It may also provide management with greater freedom and flexibility as it interacts with such supervisors, who should be treated as members of the management team with whom employers are entitled to have a direct relationship rather than as rank-and-file employees entitled to union representation at every turn.
Companies in service industries who provide employees working on site at client companies face an inherent business risk: that their customers will hire the servicing employees directly and cut the company providing the labor in the first place out of the loop. Such companies often try to protect their investment in recruiting and training their employees by requiring the clients with whom their employees work to sign "no-hire" agreements. Under this type of agreement, a client company agrees not to hire employees assigned to it for some reasonable period of time after its contract with the company providing those employees ends.
"No hire" agreements have come under scrutiny because of their effect on individual employees, who are essentially bound - or at least greatly affected - by a contract to which they were never a party and which they may not have even known existed. The Wisconsin Supreme Court recently weighed in on this issue in the case of Heyde Companies v. Dove Health Care Inc. (decided 12/20/02), finding that many such "no hire" agreements are not enforceable. The Court offered an alternative for protecting one's employee base: the use of reasonably drafted non-compete agreements with the affected employees themselves.
In a 7-2 decision, the Wisconsin Supreme Court ruled that the contract clause was governed by Wisconsin's strict requirements for covenants not to compete and was unenforceable as such a covenant. To stand up under Wisconsin non-compete law, the agreement had to be necessary for the protection of Greenbriar, reasonable as to time, reasonable as to geographic scope, not unduly harsh, and not against public policy.
The Court concluded that Greenbriar's contract failed as a reasonable non-compete on multiple counts. The no hire clause was overly broad (and therefore void) because it covered all Greenbriar therapists (rather than being limited to just those therapists who provided services to Dove). But what really seemed to drive the Court's decision was the very concept of a "no-hire" provision. The Court found that because the former Greenbriar therapists hired by Dove were essentially bound to an agreement to which they had not been a party, such a clause was unnecessary for the protection of Greenbriar, overly harsh to the affected employees, and against public policy.
Lessons for Employers
Companies that want to guard against having their clients or customers hire away their employees would be well advised to use non-compete agreements with the employees they wish to protect rather than (or in addition to) no-hire agreements with the clients against whom they may need such protection. Wisconsin law requires non-competes to be reasonably tailored to protect the interest at stake, and a whole body of case law exists defining what is and is not a reasonably drafted non-compete agreement in terms of time, geographic scope and activities proscribed. Generally speaking, a non-compete agreement with an employee having a close relationship with a client customer should be drafted to prevent the employee from exploiting that relationship by working for or establishing a direct business relationship with the client, but it should go no further. Generic non-compete forms are likely to be outdated and unenforceable.
For those employers using workers provided by a service company, the Heyde decision is not an open invitation to rip up any no-hire agreement you have signed while hiring all the workers you would like from that service company. Although the Wisconsin Supreme Court invalidated the no-hire provision in Heyde itself, it reached its decision by relying heavily on the affected employees' lack of consent. If the workers placed at your company are aware of a no-hire clause between you and the service company with whom you contract, those employees may very well remain restricted from accepting employment at your company.