On May 30th, the General Counsel for the National Labor Relations Board (NLRB) issued a memorandum to all regional directors on non-compete agreements and the National Labor Relations Act (NLRA). For reasons outlined in the memorandum, the General Counsel states that, except in limited circumstances, the proffer, maintenance, and enforcement of non-compete provisions violates the NLRA.

Non-compete agreements are common in the workplace. They are often used to limit an employee ability to accept certain jobs or operate certain types of businesses if and when they leave their current employer. Generally, this is done to prevent a former employee from going to a competitor or from operating a competing business using knowledge they gained at their current employer. In recent years, there have been efforts to limit or prohibit the use of non-compete agreements. This memorandum is just the latest effort.

In the General Counsel’s opinion, such provisions tend to be overbroad in that they tend to chill employees from exercising their Section 7 rights. Because it’s a violation of Section 8(a)(1) of the NLRA for an employer to interfere with, restrain, or coerce employees in the exercise of those rights, the use of non-competes which tend to chill the exercise of those rights would also violate the NLRA.

The memorandum outlines the ways that non-compete provisions chill employees from engaging in activities specifically protected under Section 7:

1. They chill employees from concertedly threatening to resign to demand better working conditions.
2. They chill employees from carrying out concerted threats to resign or otherwise concertedly resign to secure improved working conditions.
3. They chill employees from concertedly seeking or accepting employment with a competitor to obtain better working conditions.
4. They chill employees from soliciting their co-workers to go work for a competitor as part of a broader course of protected concerted activity.
5. They chill employees from seeking employment to specifically engage in protected activity with other workers an an employer’s workplace.

While the General Counsel believes that most non-competes violate the NLRA, the memorandum notes that non-competes that are narrowly tailored to special circumstances justifying the infringement would not. Unfortunately, the memorandum does not explain what special circumstances would justify the infringement on employee rights. However, it does state that the desire to avoid competition from a former employee would not be sufficient. Further, concerns about retaining employees or protecting proprietary information would also not be sufficient justification as those concerns can be address through less restrictive means.

The General Counsel advises regional directors to submit cases involving non-compete provisions that could be unlawful given this memorandum. Additionally, the General Counsel is recommending make-whole relief for employees subject to unlawful non-compete provisions, even where an employer is not attempting to enforce the non-compete provision. As such, employers should review their non-compete agreements and any contracts with non-compete provisions with legal counsel to ensure they align with the analysis in this newest memorandum and avoid unfair labor practices claims.

You can read the full memorandum here.