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NLRB Says Non-Competes May Violate Labor Law

The National Labor Relations Board General Counsel Jennifer Abruzzo wrote a memo directed to Board officials about non-compete agreements. She defines non-compete agreements as employers prohibiting employees from "accepting certain types of jobs and operating certain types of businesses after the end of their employment." Abruzzo asserts these agreements violate Section 7 of the National Labor Relations Act (NLRA).

Section 7 protects employees’ “right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” Abruzzo contends non-compete provisions are "overbroad" because they may be "reasonably construed" to limit an employee's ability to quit their job or change jobs by removing access to jobs for which they are qualified based their experience and skills. Employees subject to non-compete clauses will be less likely to threaten to quit to improve working conditions when they know they have reduced access to other employers. The general counsel also says employers who suggest legal action against employees threatening to breach their agreements would violate the NLRA. The restrictions of a non-compete agreement chill an employee's ability to engage in protected Section 7 activity by reducing their ability to find new jobs if employers discharge them for exercising their right to organize. These agreements also preclude employees from working together at a new employer where they could act together to improve those working conditions.

Abruzzo submits that non-compete provisions must be narrowly tailored to special circumstances. A "desire to avoid competition from a former employee is not a legitimate business interest that could support a special circumstances defense." She notes employers have a legitimate business interest in protecting proprietary or trade secret information and may narrowly tailor agreements accordingly. Not all non-compete agreements will necessarily violate the NLRA, such as provisions restricting managerial or ownership interests in a competing business or true independent contractor relationships.