Non-Compete Agreements

1 year ago

On May 30, 2023, the attorney for the National Labor Relations Board (NLRB), Jennifer Abruzzo, sent a memo signifying her opinion that, for the most part, non-compete provisions in employment contacts and severance agreements violate the National Labor Relations Act (NLRA). She notes that overly-broad non-competes are unlawful because they have a chilling effect on employees, keeping them from exercising their Section 7 rights under the Act to take concerted activity (collective action) to improve their working conditions.

Specifically, she noted the “agreements interfere with the employee’s ability to:

concertedly threaten to resign to secure better working conditions
carry out concerted threats to resign or otherwise concertedly resign to secure improved working conditions;
concertedly seek or accept employment with a local competitor to obtain better working conditions;
solicit their co-workers to go work for a local competitor as part of a broader course of protected concerted activity;
seek employment, at least in part, to specifically engage in protected activity, including union organizing, with other workers at an employer’s workplace.

As an explanation, she signified that because employees who have non-compete agreements “know” they will have greater difficulty replacing lost income if discharged, their bargaining power is undermined. She notes that an employer has no defense, stating that an employee cannot waive their Section 7 rights in individual contracts, even if they have already signed such an agreement. The NLRB also reports that last year they entered into a “memoranda of understanding (MOU) with the Federal Trade Commission and the Department of Justice’s Antitrust Division, both of which have addressed the anticompetitive effects of non-compete agreements.”

If you think this doesn’t apply to you, know that this decision affects employers whether or not they have a unionized workforce. If you are unsure about the laws that might affect you as an employer, contact us at Southwestern HR Consulting (SWHRC) today and we can provide you with guidance from our team of experts.