Articles

The NLRB: Noncompete Agreements Are Unlawful

June, 2023

NLRB GENERAL COUNSEL MEMO: 

NONCOMPETE AGREEMENTS ARE USUALLY UNLAWFUL, BUT NON-MANAGERIAL EMPLOYEES ARE UNAFFECTED

In a memo released May 30, 2023, the General Counsel of the National Labor Relations Board (NLRB) announced that noncompete agreements violate the National Labor Relations Act (NLRA).  The NLRA applies to both nonunionized and unionized employers and such employers may face an unfair labor practice charge with the use of noncompete agreements.

The memo explains that overbroad noncompete agreements are unlawful because they chill employees from exercising their rights under Section 7 of the NLRA, which protects employees’ rights to take collective action to improve their working conditions.

As the memo reads, “This denial of access to employment opportunities interferes with workers engaging in Section 7 activity in a number of ways.  For example, workers know that they will have greater difficulty replacing their lost income if they are discharged for exercising their statutory rights to organize and act together to improve working conditions; their bargaining power is undermined in the context of lockouts, strikes and other labor disputes; and their social ties and solidarity leading to improvements in working conditions at workplaces are lost as they scatter to the four winds.”

The General Counsel’s memo stated that noncompete agreements interfere with employees’ 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 ab 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.

Thus, any employer that uses non-compete agreements, plans to do so in the future or might enforce such provisions now faces the prospect of an unfair labor practice charge and subsequent complaint from the NLRB regional offices, such as the one in Hartford.

The memo explains that when someone who filed an unfair labor practice charge claiming discrimination in an NLRB case alleges they lost out on work opportunities because of a noncompete provision, the NLRB regions should seek to make the individual whole in compensation.

It is important to note, however, that the NLRA excludes supervisors and managerial employees from its coverage and protections.