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NLRB General Counsel Intends to Challenge Non-Compete Agreements

On May 30, 2023, NLRB General Counsel Jennifer Abruzzo expressed her intent to pursue employers who proffer, maintain, or enforce non-compete agreements against non-supervisory employees. According to Abruzzo, non-compete provisions tend to interfere with employees’ rights to engage in protected, concerted activities. Specifically, Abruzzo places a premium on an employee’s ability to threaten resignation in order to obtain better terms and conditions of employment, as well as an employee’s ability to follow through with such a threat without fear that the employee will be unable to obtain a new position with a competitor. Further justification lies in a non-compete agreement prohibiting an employee from soliciting other employees to go to work for a competitor. Finally, Abruzzo believes that enforcing a non-compete agreement will chill the approved practice of union “salting” – sending employees to an employer for the express purpose of unionizing the workforce.

Abruzzo recognizes that a narrowly tailored non-compete may be unobjectionable, including agreements that restrict only an individual’s managerial or ownership interests, or in the case of true independent contractor relationships. Notably, however, the protection of training investments is no justification for enforcing a non-compete, as, according to Abruzzo, less restrictive measures such as a longevity bonus exist.

Abruzzo’s attack follows her earlier pronouncement that Confidentiality and Non-Disparagement Provisions in separation agreements will be closely scrutinized, and also joins the federal government’s broader movement to restrict or eliminate non-compete agreements. See our January 2023 Law Alert on the Federal Trade Commission’s movement to ban non-compete agreements for more information.

It remains to be seen whether Abruzzo’s push will find support with the full NLRB, or whether, instead, her efforts will be recognized by the NLRB as the over-reach in agency power that it seems. Regardless of whether the NLRB endorses Abruzzo’s position, it is bound to face legal challenges and, dependent upon the U.S. Supreme Court’s upcoming decision in Loper Bright Enterprises involving the Chevron Doctrine, might well be ruled as exceeding agency authority.

For questions related to this or any other issues relating to the Scopelitis Law Firm Labor & Employment Practice, contact Scopelitis Partners Jim Hanson, David Robinson, Jack Finklea, Don Vogel, or Greg Feary.

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News from Scopelitis is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.

NLRB General Counsel Intends to Challenge Non-Compete Agreements

On May 30, 2023, NLRB General Counsel Jennifer Abruzzo expressed her intent to pursue employers who proffer, maintain, or enforce non-compete agreements against non-supervisory employees. According to Abruzzo, non-compete provisions tend to interfere with employees’ rights to engage in protected, concerted activities. Specifically, Abruzzo places a premium on an employee’s ability to threaten resignation in order to obtain better terms and conditions of employment, as well as an employee’s ability to follow through with such a threat without fear that the employee will be unable to obtain a new position with a competitor. Further justification lies in a non-compete agreement prohibiting an employee from soliciting other employees to go to work for a competitor. Finally, Abruzzo believes that enforcing a non-compete agreement will chill the approved practice of union “salting” – sending employees to an employer for the express purpose of unionizing the workforce.

Abruzzo recognizes that a narrowly tailored non-compete may be unobjectionable, including agreements that restrict only an individual’s managerial or ownership interests, or in the case of true independent contractor relationships. Notably, however, the protection of training investments is no justification for enforcing a non-compete, as, according to Abruzzo, less restrictive measures such as a longevity bonus exist.

Abruzzo’s attack follows her earlier pronouncement that Confidentiality and Non-Disparagement Provisions in separation agreements will be closely scrutinized, and also joins the federal government’s broader movement to restrict or eliminate non-compete agreements. See our January 2023 Law Alert on the Federal Trade Commission’s movement to ban non-compete agreements for more information.

It remains to be seen whether Abruzzo’s push will find support with the full NLRB, or whether, instead, her efforts will be recognized by the NLRB as the over-reach in agency power that it seems. Regardless of whether the NLRB endorses Abruzzo’s position, it is bound to face legal challenges and, dependent upon the U.S. Supreme Court’s upcoming decision in Loper Bright Enterprises involving the Chevron Doctrine, might well be ruled as exceeding agency authority.

For questions related to this or any other issues relating to the Scopelitis Law Firm Labor & Employment Practice, contact Scopelitis Partners Jim Hanson, David Robinson, Jack Finklea, Don Vogel, or Greg Feary.

News from Scopelitis is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.