NLRB general counsel memo discourages noncompetes

Proffering, maintaining and enforcing noncompete provisions in employment contracts and severance agreements violates the National Labor Relations Act except in limited circumstances, NLRB general counsel Jennifer Abruzzo said in a memo issued Tuesday.

The memo says these agreements interfere with employees’ rights under Section 7 of the NLRA, which protects employees’ right to take collective action to improve their working conditions.

“Non-compete provisions are overbroad, that is, they reasonably tend to chill employees in the exercise of Section 7 rights, when the provisions could reasonably be construed by employees to deny them the ability to quit or change jobs by cutting off on their access to another employment opportunities,” says Ms. Abruzzo’s memo, which was distributed to NRLB regional directors, officers-in-charge and resident officers.

The memo says noncompetes “chill” employees from engaging in five types of activities: concertedly threatening to resign to demand better working conditions and carrying out these threats; concertedly finding employment with a local competitor to obtain better working conditions; soliciting co-workers to work for a local competitor; and seeking employment to engage in protected activity with other workers at an employer’s workplace.

The memo says an example of cases where noncompetes do not violate the NLRA would be where there are provisions that clearly restrict only individuals’ managerial or ownership interests in a competing business or “true independent contractor relationships.”

The NLRB is not the only federal agency to focus on this issue. In January, the Federal Trade Commission proposed a sweeping ban on noncompete agreements in employment contracts, although opponents say implementation could be delayed or prevented by litigation charging the agency has exceeded its authority.

Noncompetes have been a focus of litigation among insurance brokers. Last month, for instance, McGriff Insurance Services LLC sued a former vice president, charging him with sending confidential information to his new employer before leaving for the competitor and soliciting McGriff employees and clients in violation of his employment agreement. 

Discovery in that case is scheduled to be completed by Jan. 31, 2024, according to a filing last week with the U.S. District Court in Greensboro, North Carolina. 


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