On May 30, 2023, the National Labor Relations Board (NLRB), a government agency vested with safeguarding employees’ rights, issued a crucial memorandum concerning Non-Compete Agreements. The memo, entitled “Non-Compete Agreements that Violate the National Labor Relations Act” and penned by Jennifer A. Abruzzo, General Counsel of the NLRB, targets the enforceability of non-compete agreements, a long-standing thorn in the side of workers. In this article, we unpack what this memo means and why it could potentially alter the landscape for workers’ rights in the United States.
The Problem with Non-Compete Agreements
Non-compete agreements are employment clauses that bar employees from working for competitors or starting a similar business once they leave their job. Employers justify these agreements as a way to protect their proprietary information, client lists, and business practices. However, the issue with these agreements is that they restrict workers’ freedom to pursue better opportunities, negotiate improved working conditions, and use their skills and experience where they see fit.
In essence, non-compete agreements hamper economic mobility for workers and can lead to a chilling effect on workers’ rights, discouraging the exercise of their freedoms protected under Section 7 of the National Labor Relations Act (NLRA).
Understanding the Memo
The memo identifies a critical issue: non-compete agreements can violate Section 8(a)(1) of the NLRA, which prohibits employers from interfering with their employees’ exercise of rights under Section 7. Section 7 protects the right of workers to self-organize, join or form unions, collectively bargain, and engage in other concerted activities for mutual aid or protection.
Non-compete agreements are considered overbroad when they discourage employees from participating in these Section 7 activities. Abruzzo clearly lists five ways these agreements can do so. These include discouraging employees from threatening to resign for better conditions, resigning collectively for improved work conditions, seeking employment with competitors for better conditions, soliciting co-workers to join a local competitor, and seeking employment specifically to engage in protected activities with other workers.
The memo proposes that any non-compete provision that chills employees from engaging in Section 7 activity should violate Section 8(a)(1) unless justified by special circumstances. An employer’s desire to avoid competition or retain employees does not qualify as a legitimate business interest justifying the imposition of a Non-Compete Agreement. The memo does not suggest that all non-compete agreements violate the NLRA, but it does propose a narrower interpretation of these agreements. For a non-compete agreement to be considered valid, it should be narrowly tailored to address special circumstances without infringing on worker’s rights.
Implications for Workers
This NLRB memo is significant for a number of reasons. First, it makes clear that non-compete agreements shouldn’t be used as a means to limit workers’ rights or prevent them from seeking better opportunities. The right to switch jobs, to bargain collectively, and to seek improved working conditions are protected by law.
Second, it creates room for a broader interpretation of the NLRA and can potentially affect future decisions of the Board. The General Counsel’s position could encourage the Board to adopt a more worker-friendly interpretation of the Act, which could lead to rulings that restrict the use of non-compete agreements and affirm employees’ rights.
Third, the memo encourages NLRB regional officers to seek remedies for workers who can prove they lost job opportunities due to overly broad non-compete clauses. This might not just lead to legal repercussions for offending companies, but also possibly provide relief for affected workers.
In Conclusion
While we’re yet to see the full impact of this memo, it marks a strong step towards affirming workers’ rights and rebalancing the power dynamics between employers and employees. It’s a promising indication that the workers are gaining ground in dismantling barriers to worker mobility. While we wait for the full effects of this memo to unfold, it certainly brings us a step closer to a fairer, more equitable work environment. The memo signifies a renewed commitment and significant stride towards strengthening workers’ rights and promoting fairness in the workplace. As non-compete agreements continue to be scrutinized, it is essential for both employers and employees to be aware of the evolving legal landscape and to ensure that these agreements strike a fair balance between protecting legitimate business interests and respecting workers’ rights.
Sinapi Law Associates, Ltd. has a proven track record over a period of nearly 40 years of protecting and vindicating the employment law rights of individuals. You can learn more about our employment law practice here. If you believe your employment law rights may have been violated, you can submit a request for a free case evaluation here or give us a call at 401-739-9690.
