Megan K. Mechak
Wed, 05/31/2023
National Labor Relations Board General Counsel Jennifer Abruzzo dealt another blow to non-compete agreements in the United States on Tuesday, concluding in a memorandum issued to the NLRB’s Regional Director that most non-compete agreements violate federal labor laws.
Non-compete agreements, often signed when workers start or leave their jobs, prohibit employees from accepting certain types of jobs after leaving their employer. According to a recent Government Accountability Office report, almost one in five workers in the United States is covered by a non-compete agreement, including many low wage part-time workers in fields like hospitality and retail.
According to the GC’s memorandum, non-compete agreements generally interfere with a worker’s ability to exercise their rights under Section 7 of the National Labor Relations Act (the “Act”), which protects employees’ “right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” The General Counsel previously encouraged the NLRB to adopt the position that an employment agreement violates the Act if it “reasonably tends to chill employees in the exercise of Section 7 rights unless it is narrowly tailored to address special circumstances justifying the infringement on employee rights.” The NLRB already applies a similar standard to severance agreements.
The General Counsel concludes that non-compete provisions are overbroad and violate the Act if the provisions could reasonably be constructed by workers to deny them the ability to change jobs by eliminating their access to other employment for which they are qualified based on their experience and aptitudes, and preferences as to type of work or location. Because workers subject to non-compete agreements know they will have difficulty replacing lost income if they are discharged for exercising their statutory rights, according to the GC, they are less likely to exercise those rights. The memorandum acknowledges that there are some special circumstances where a non-compete agreement narrowly tailored non-compete agreement may be justified.
The memorandum instructed Regional Directors to, in appropriate circumstances, seek make-whole relief for employees who can demonstrate they lost opportunities for other employment because of their employer’s unlawful maintenance of a non-compete provision.
Non-compete agreements were already under fire by the federal government, as the Federal Trade Commission (“FTC”) has proposed a rule to ban non-compete agreements. The FTC will likely vote on the proposed rule in 2024. Additionally, multiple states have banned non-compete agreements, except in very limited circumstances.
If you believe your employer has unlawfully subjected you to a non-compete agreement, contact MSE at info@mselaborlaw.com.
