Offering, maintaining and enforcing non-compete clauses in employment contracts and severance pay 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 infringe on employees’ rights under Section 7 of the NLRA, which protects employees’ right to take collective action to improve their working conditions.
“Non-competition clauses are overarching, that is, they reasonably tend to chill employees in the exercise of Section 7 rights, when the provisions could reasonably be interpreted by employees to deny them the ability to quit or change jobs by cutting off their access to another employment opportunity,”
; said the Abruzzo memo, which was distributed to NRLB regional directors, responsible officers and resident officers.The memo says non-competitors “chill” employees from engaging in five types of activities: making concerted threats to quit to demand better working conditions and carrying out those threats; to aggregate employment with a local competitor to obtain better working conditions; encourage employees to work for a local competitor; and apply for employment to participate in protected activities with other workers at an employer’s workplace.
The memo says that an example of cases where non-competitors do not violate the NLRA would be where there are provisions that clearly limit only individuals’ management or ownership interests in a competing business or “genuine independent contractor relationships.”
The NLRB is not the only federal agency focusing on this issue. In January, the Federal Trade Commission proposed a sweeping ban on noncompete clauses in employment contracts, though opponents say implementation could be delayed or prevented by litigation that charges the agency has overstepped its authority.
Non-competes have been a focus of litigation among insurance brokers. Last month, for example, McGriff Insurance Services LLC sued a former vice president, accusing him of sending confidential information to his new employer before leaving for the competitor and recruiting 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 in U.S. District Court in Greensboro, North Carolina.
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