There may be a change coming to non-compete agreements under the NLRA

On May 30, 2023, GC Jennifer A. Abruzzo released Memorandum 23-08, Non-Compete Agreements that Violate the National Labor Relations Act. Here, Abruzzo urges the National Labor Relations Board to make new law declaring that the continued maintenance and enforcement of employee non-compete agreements by employers unlawful. This follows the FTC’s recent proposal to ban virtually all non-compete agreements. 

Section 7 of the National Labor Relations Act provides both union and non union employees with the “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.” If an employer interferes with or restrains employees in Section 7 rights, it also violates Section 8(a)(1).

Abruzzo states that with few exceptions, non-competes tend to “chill” employees from engaging in five specific types of activities that are protected under Section 7:

  1. Threatening to resign in a demand for better working conditions.
  2. Resigning to secure improved working conditions
  3. Seeking out or accepting employment from a competitor to obtain better working conditions.
  4. Soliciting co-workers to work for a competitor as a part of a larger course of protecting their activity.
  5. Seeking employment to engage in a protected activity with other workers at their workplace.

Abruzzo said she already issued a complaint alleging the unlawful enforcement of a non-compete provision that impacted low-wage employees because “there was no evidence of a legitimate business interest justifying the provision.” She did acknowledge that non-compete contracts can be lawful in the situation of “true” independent-contractor situations and can be justified in special circumstances. Abruzzo did not specify what circumstances this would apply to. The GC also did not address the tension between Abruzzo’s position and the laws of numerous states that grant employers the right to protect proprietary information.

In her latest piece of diplomacy, Abruzzo continues her aggressive campaign to implement pro-labor policies that the Biden administration has not been able to accomplish through other legislation. 

While Abruzzo’s campaign represents her opinion on how the NLRA should be interpreted, it is sharply at odds with the current state of the law. By stating that the Board has the authority to outlaw employer agreements that have been enacted since 1935, the GC also seeks a wide expansion of her and the Board’s authority. If the Board adopts Abruzzo’s position, it would certainly be challenged. 

Neither the FTC nor Abruzzo’s positions require employers to take any immediate action. However, it would be wise for employers to review their current contracts with employees and consider how these developments might impact them. 


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