- Companies that include noncompete provisions in employment and severance agreements violate the National Labor Relations Act (NLRA) in most cases, National Labor Relations Board General Counsel Jennifer Abruzzo said in a memo to agency leaders Tuesday.
- Overly broad noncompetes keep employees from exercising their NLRA Section 7 rights, which protect workers’ right to engage in collective action to improve their working conditions, Abruzzo said. The provisions affect employees’ ability to resign or look for a job with a local competitor to improve working conditions, to encourage co-workers to accept jobs at a local competitor and to take a job to participate in union organizing at the workplace. In limited cases, noncompete agreements can adhere to the NLRA if they only apply to workers’ managerial or ownership interests in a competitor and in independent-contractor arrangements, Abruzzo said.
- “Non-compete provisions 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 their access to other employment opportunities that they are qualified for based on their experience, aptitudes, and preferences as to type and location of work,” Abruzzo said in a news release.
Abruzzo’s memo is the latest move by the federal government in its larger effort to limit noncompete provisions.
The Federal Trade Commission in January proposed a ban on noncompete clauses, arguing that the agreements suppress workers’ wages and stifle competition. The FTC received more than 18,000 comments from individuals, associations and businesses on the proposed rule. Public comments were largely split between those representing employers and those representing employees. Employer advocates seemed to question the rule, arguing it would endanger sensitive business information and trade secrets, while employee supporters generally favored the ban, saying it would improve career opportunities and earning potential for workers.
The NLRB also established memorandums of understanding last year with the FTC and the Department of Justice’s Antitrust Division to work together to protect workers’ rights when it comes to noncompete agreements.