In an unprecedented act, the National Labor Relations Board (NLRB) has begun to take action against non-compete clauses, a move that they had promised previously. You can find all the details in this related report.
Citing concerns over its potential to undermine employees’ rights, the General Counsel, Abruzzo, took a firm stand against non-compete agreements in a Memorandum issued on May 30, 2023. According to the Memorandum, such contractual restrictions may run afoul of Section 7 of the National Labor Relations Act by inhibiting employees’ ability to engage in concerted activity.
The General Counsel considered that non-compete clauses and other similar restrictions stand to strip employees of their ability to negotiate for better working conditions or seek employment elsewhere. Such clauses, as a result, may effectively coerce employees into accepting terms and conditions, thereby curtailing their freedom to make career moves in their best interests.
However, this new step does not entail a complete prohibition of non-compete clauses. Nevertheless, it signals that the NLRB counsel disapproves of its use and aims to curb its application where possible. By doing so, the Board hopes to foster a more equitable and less obstructed labor market.
The legal fraternity, particularly those specializing in labor law, should be vigilant about these developments and advise their corporate clients accordingly. The stance of the NLRB could impact the structure and legality of future employment contracts significantly.
While further developments are awaited, the memo from the counsel is a salient reminder that non-compete clauses, if not carefully structured and used, might soon find themselves under legal challenge by relevant labor authorities.