31 May 2023

NLRB General Counsel Takes Aim at Employer Non-Compete Agreements

Yesterday, the National Labor Relations Board’s (NLRB) General Counsel, Jennifer Abruzzo, issued another memo seeking to secure employer compliance with changes in federal law that she would like to see adopted. In this memo, the General Counsel joins the FTC in targeting non-competes. For the first time ever, the NLRB takes the position that most non-compete agreements—designed to protect against unfair competition—are now unlawful under the National Labor Relations Act (NLRA).

The memo, which was publicly shared and supported by the agency, directs NLRB Regional Directors to bring cases against any employer who proffers, maintains, or enforces a non-compete agreement against non-supervisory employees covered by the NLRA.

In support of this attempt to supplant well-established and settled state law permitting properly tailored non-competes, General Counsel Abruzzo asserts that these agreements have a “chilling effect” on employees’ exercise of protected rights rendering them unlawful under federal labor law. According to the memo, by “interfering with” employees’ ability to engage in certain types of protected activity, non-compete agreements undermine employees’ power in the context of bargaining regarding lockouts and strikes, and when leveraging their prior relationships. The memo also claims that non-competes lead to employees having a harder time replacing lost income if they are discharged for engaging in protected activity—so, they are less likely to engage in protected activity.

The memo recognizes that non-disclosure agreements protecting confidential and proprietary information should not be treated the same as non-compete agreements, and the NLRB has not adopted this rule. Nevertheless, employers should be prepared for the NLRB to act on its threats to prosecute unfair labor practice charges in this space.

Miller Johnson is following this matter closely and will provide additional information as it becomes available. In the meantime, please contact the authors or your Miller Johnson Labor and Employment Law attorney if you would like more information or to discuss how this memo impacts your organization.