The General Counsel (GC) for the National Labor Relations Board, Jennifer Abruzzo, continues the Board’s crusade against noncompetition agreements in Memorandum GC 23-08 (May 30, 2023). The GC serves as the Board’s lead prosecutor and directs the regional directors on when to pursue complaints against employers.
In this latest guidance, the GC has targeted noncompetition agreements for current workers and has concluded that such agreements inhibit employees’ exercise of their protected rights to act in concert with each other. The GC will challenge employers if they seek noncompetition agreements from covered employees (those who are neither supervisory nor managerial), continue to treat such agreements as valid and enforceable, or attempt to enforce such agreements. This guidance applies to both union and non-union workplaces.
Although the GC cited various rationales, the focus is that such agreements inhibit employees from threatening to quit or quitting in protest of, or as a challenge to, employment practices and policies. The GC specifically rejects various “protectible interests,” which employers routinely cite as justifications for such noncompetition agreements, including cost of training or the need to protect trade secrets or other proprietary information. The GC reasons that there are other less intrusive means to protect such interests, and it is “unlikely” for an employer to have legitimate business interests when low-wage or middle-wage workers are involved. The rare exception where noncompetition agreements may be justified is when it is part of a business acquisition. The GC noted that the guidance would also apply to independent contractors who are “misclassified” employees.
This memorandum builds on the recent decision in McLaren Macomb, 372 NLRB No. 58 (2023), where the Board ruled that including or enforcing noncompetition agreements in severance agreements was unlawful, and the subsequent guidance issued by the General Counsel in Memorandum GC 23-05 (March 22, 2023). Here are links to our prior blog posts on McLaren Macomb and the earlier guidance.
What should you do now?
This guidance is part of the continued spotlight on noncompetition agreements at both the state and federal level. Noncompetition agreements should be used sparingly and generally only for higher paid employees (if at all), and only where there are legitimate business needs and interests. Simply tendering or keeping in place previously executed noncompetition agreements is questionable and may be subject to challenge at the National Labor Relations Board.
The legal issues impacting this topic are and will continue to be ever-changing (Employment Law in Motion!), and since publication of this blog post, new or additional information not referenced in this blog post may be available.
This article is provided for informational purposes only—it does not constitute legal advice and does not create an attorney-client relationship between the firm and the reader. Readers should consult legal counsel before taking action relating to the subject matter of this article.