NLRB Issues Memo Clarifying Stance on Non-Compete Agreements

June 5, 2023

A noteworthy memo was issued last week by Jennifer Abruzzo, General Counsel for the National Labor Relations Board (NLRB) regarding non-compete agreements.

In it, Abruzzo outlined the NLRB’s position on non-competes specifically how, in many instances, she believes they violate the National Labor Relations Act (NLRA). Abruzzo’s memo reads, in part:

Non-compete provisions are overbroad, that is, they reasonably tend to chill
employees in the exercise of Section 7 rights, when the provisions 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 qualified for based on their experience, aptitudes, and preferences as to type and location of work.

Section 7 of the National Labor Relations Act protects workers’ right to strike, saying, in part:

“Employees shall have the right . . . to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

Abruzzo goes on to outline five specific areas where non-compete agreements can effectively deny employees the ability to change jobs—areas specifically protected under Section 7 of the NLRA. 

1. They chill employees from concertedly threatening to resign to demand better working conditions.
2. They chill employees from carrying out concerted threats to resign or otherwise concertedly resigning to secure improved working conditions.
3. They chill employees from concertedly seeking or accepting employment with a local competitor to obtain better working conditions.
4. They chill employees from soliciting their co-workers to go work for a local competitor as part of a broader course of protected concerted activity
5. They chill employees from seeking employment, at least in part, to specifically engage in protected activity with other workers at an employer’s workplace.
    

The NLRB memo also addresses the practice of requiring employees without access to protected materials to sign a non-disclosure.

It is unlikely an employer’s justification would be considered reasonable in common situations where overbroad non-compete provisions are imposed on low-wage or middle-wage workers who lack access to trade secrets or other protectable interests, or in states where non-compete provisions are unenforceable.

We are following this issue closely as it has the potential to have a significant impact on employers who have traditionally used non-compete agreements as a standard tool when hiring employees. If you have questions or concerns about non-compete agreements and how your organization may be impacted by this latest update, please give myself or any member of our Labor and Employment team a call.

You can view the full memo from the NLRB here.

Scott Philbin is a Buffalo-based litigation attorney handling a broad array of business and commercial matters at the trial and appellate levels in both state and federal court. He can be reached at 716-854-4300 ext. 305 or sphilbin@gross-shuman.com.