NLRB General Counsel Seeks Non-Compete Broad Agreement Restrictions

NLRB General Counsel Abruzzo expanded her pro-labor crusade this week, issuing a memo claiming that non-compete agreements violate federal labor law “except in limited circumstances.” The memo itself has no legal effect, and it will be up to the Board to eventually decide whether to adopt Abruzzo’s opinion as law. 

Chilling employee rights: Abruzzo’s memo claims that non-compete agreements chill employee rights to concerted activity (organizing, protesting working conditions, etc.) because if employees are fired for exercising such rights, they will feel that they have “greater difficulty replacing their lost income” as a result of the non-compete. The memo specifically claims that non-compete agreements render employees afraid to threaten to resign or work elsewhere (actions Abruzzo, perhaps questionably, considers explicitly protected by the Act), among other actions. Per the memo, non-compete agreements are only lawful under the NLRA where they are “narrowly tailored to address special circumstances justifying the infringement on employee rights.”

The Board will decide: The memo itself is not legally binding, and merely expresses the General Counsel’s opinion as she has already articulated in cases before the Board. It will be up to the Board to decide in such cases whether to adopt Abruzzo’s opinion and establish that non-compete agreements generally violate the NLRA. However, in the meantime, the memo will encourage the filing of unfair labor practice charges – particularly by unions –  against employers using non-compete agreements and Board prosecutors to pursue such charges. 

Small scope: Even if the Board were to agree with Abruzzo, any resultant non-compete ban would be far smaller in scope than the FTC’s Proposed Rule. The NLRA only applies to non-supervisory employees, i.e., employees without any management-type authority. Thus, non-compete agreements would still be acceptable for executive-level employees (although perhaps not for certain non-executive employees with access to trade secrets).

The memo might be Abruzzo’s most brazen attack yet on long-established employment practices, all conducted under the guise of protecting employee rights under federal labor law. Tying rights to protest working conditions to non-compete agreements requires a significant logical and legal leap; for one, non-compete agreements govern post-employment conduct, and therefore explicitly do not cover the employee’s current working conditions or concerted activity regarding the same. As with severance agreements, workplace rules, workplace monitoring, and the other issues the General Counsel has commented on, she is substituting her own judgment in place of the “reasonable employee” by assuming that such employer actions or policies are inherently designed, implemented, or enforced to restrict employee rights under federal labor law. 

Outlook: Once again, General Counsel Abruzzo is attempting to stretch federal labor law beyond any interpretations we have seen before, even under previous Democrat-majority Boards. Whether or not the Board follows her on her crusade remains to be seen; it has been hesitant, in some cases, to adopt some of Abruzzo’s more extreme positions. Regardless, the memo provides yet another example of the lengths to which Abruzzo is attempting to transform labor law in overwhelming favor of unions and workers. General Counsel Abruzzo will be speaking at our Washington Policy Conference this fall to discuss these and other key labor issues.