On May 30, 2023, Jennifer Abruzzo, the General Counsel of the National Labor Relations Board (Board), issued a guidance memo (the “Memo”) stating that non-compete agreements or similar restrictive covenants in settlement agreements between the employer and its employees violate Section 7 of the National Labor Relations Act (NLRA). The Memo goes on to direct that cases where non-compete agreements or provisions are overbroad must be prosecuted and submitted to the Board.
Under Section 7 of the NLRA, employees “have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively…, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” However, for the first time since the inception of the NLRA in 1935, the General Counsel is taking the position that a non-compete agreement, absent narrow tailoring, constitutes an Unfair Labor Practice (ULP) under Section 7.
In the Memo, Abruzzo declared “[n]on-compete provisions are overbroad, that is, they 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.” The Board applied a similar standard to confidentiality and non-disparagement agreements in its recent decision in McLaren Macomb. Abruzzo has argued that this standard should apply to work rules in Stericycle, Inc., but the Board has yet to decide the case.
