Non-Compete Agreements

Non-compete agreements

Non-compete agreements are facing increased scrutiny, with the National Labor Relations Board (NLRB) joining the fray. This Memo follows the Federal Trade Commission’s (FTC) recent proposal to ban most non-compete restrictions, providing very limited exceptions. In a recent memo, the NLRB's General Counsel Jennifer Abruzzo stated that non-competes in employment and severance agreements generally violate the National Labor Relations Act (NLRA). This development raises concerns for employers, but it's essential to understand the memo's limitations and potential challenges the NLRB may encounter.

According to the memo, the NLRB claims that non-compete agreements are often overly restrictive, limiting employees' job mobility and access to new opportunities. However, the memo lacks solid evidence to support this claim and fails to acknowledge that state laws typically require non-competes to be reasonably tailored to protect legitimate business interests.

While the memo suggests that non-competes can be acceptable under special circumstances, it doesn't provide clear examples. This ambiguity leaves room for interpretation. Moreover, the memo does not address state laws that set wage thresholds for non-competes or ban them entirely in some states.

It's important to note that the NLRB's memo is not binding. Administrative Law Judges will decide cases involving non-competes, and their decisions can be appealed. Historically, the NLRB has not declared non-competes as violations of the NLRA. Thus, the NLRB may face challenges in proving that non-competes interfere with employees' rights.

For now, employees should be prepared and cautious. Non-compete agreements can still be used if they are narrowly tailored and comply with relevant laws. For employers, it's crucial to evaluate the risks of asking certain employees, such as non-exempt or low-wage workers, to sign non-compete agreements. Some states already restrict or prohibit such agreements, and enforcement agencies are targeting them more closely.

The NLRB's memo adds to the ongoing debate on non-compete agreements. Employers should approach this development with caution and be aware of the memo's limitations. It is crucial for employees to examine these Agreements with an attorney to ensure that non-compete agreements are well-drafted, narrowly drafted to protect legitimate business interests, and comply with state laws.