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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 8 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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On May 30, 2023, National Labor Relations Board (NLRB) General Counsel (GC) Jennifer Abruzzo issued an enforcement memorandum targeting non-compete provisions in employee contracts and separation agreements.

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GC Abruzzo states that non-compete provisions are overbroad, and therefore unlawful, “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.” GC Abruzzo asserts that these non-compete provisions specifically interfere with employees’ legal right to:

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GC Abruzzo does not go as far as to suggest a blanket ban of all non-compete provisions, stating that such a provision will not violate Section 8(a)(1) of the National Labor Relations Act (NLRA) if “the provision is narrowly tailored to special circumstances justifying the infringement on employee rights.” However, the memo is skeptical as to what “special circumstances” would justify such an infringement. For instance, the GC indicated that a mere desire to avoid competition with a former employee would not constitute a legitimate business interest that could support a special circumstances defense. She further reasoned that business interests in retaining employees or protecting special investments in training employees would also be unlikely to justify an overbroad non-compete provision “because U.S. law generally protects employee mobility, and employers may protect training investments by less restrictive means.”

GC Abruzzo does note that employers have a legitimate business interest in protecting proprietary or trade secret information, but stated that protecting those interests could be protected by more narrowly tailored agreements.

GC enforcement memos are not binding law; they simply detail the legal theories the GC will utilize to pursue unfair labor practice charges against employers. Under this memo, NLRB regional offices are required to submit cases concerning “arguably unlawful” non-compete agreements and special circumstances defenses to the NLRB Division of Advice. We expect to see NLRB Regional Offices begin to issue Complaints challenging non-compete provisions as being unlawful under the NLRA.

Should the NLRB eventually adopt GC Abruzzo’s theory, it will have little if any effect on non-compete agreements in many states where non-competes may be imposed only on supervisory, managerial, executive and other high-level personnel, none of whom meet the definition of an “employee” covered by the NLRA.

Employers should contact their Thompson Hine attorney to assess their use of non-compete agreements and employees’ rights under the NLRA.

https://admin.thompsonhine.com/wp-content/uploads/2023/06/Labor-Employment-@lert-NLRB-General-Counsel-Issues-Enforcement-Memorandum-Targeting-Non-Competes.pdf

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<em>This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.</em>

<em>This document may be considered attorney advertising in some jurisdictions.</em>

NLRB General Counsel Issues Enforcement Memorandum Targeting Non-Competes

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