A recent memo from the National Labor Relations Board’s General Counsel should give employers new cause for concern over using noncompetition clauses for non-management employees.
Attentive employers know that noncompetes have come under tremendous scrutiny lately. The temperature rose significantly on May 30 when NLRB GC Jennifer Abruzzo distributed a memorandum opining that using noncompete agreements for non-management workers violates Section 7 of the National Labor Relations Act.
Section 7 guarantees workers the right to concerted activities such as collective bargaining, mutual aid, and mutual protection. The GC says that the very act of having employees sign noncompetes unlawfully impairs Section 7 rights by chilling employees from engaging in certain protected activities. For example, a noncompete might chill employees from threatening to resign concertedly, from carrying out such a threat, or from defecting en masse to a competitor. According to the GC, employees would view such concerted activities as futile since the noncompete would cut off their access to other opportunities. So they wouldn’t act at all.
The GC’s guidance comes with two important qualifications. First, it applies only to non-management personnel, not managers; and it allows an employer to restrict a person from taking a managerial role or ownership interest in a competitor. Second, a provision may be acceptable if it is “narrowly tailored to special circumstances justifying the infringement on employee rights”—for example, protecting proprietary or trade-secret information.
And now, the most important part: What does the GC want the NLRB to do? She has asked Regional Directors to seek advice about acting on any case involving a noncompete that “arguably” violates Section 7—even if the employer has never tried to enforce it. That is, simply having a noncompete in an employee’s file may constitute a violation.
If you use noncompetes for non-management personnel, and you’d like to reexamine things, contact one of our attorneys. We’re happy to help.