Non-compete clauses in agreements likely violate federal law

On 30 May 2023, Jennifer A. Abruzzo, General Counsel of the NLRB, issued MEMORANDUM GC 23-08. In the 6-page memo, she states in part:

In workplaces across America, many employers are requiring their employees to sign non-compete agreements to obtain or keep their jobs, or as part of severance agreements. Generally speaking, non-compete agreements between employers and employees prohibit employees from accepting certain types of jobs and operating certain types of businesses after the end of their employment. As explained below, such agreements interfere with employees’ exercise of rights under Section 7 of the National Labor Relations Act (the Act or NLRA). Except in limited circumstances, I believe the proffer, maintenance, and enforcement of such agreements violate Section 8(a)(1) of the Act.

She later states the following:

I note that employers’ legitimate business interest in protecting proprietary or trade secret information can be addressed by narrowly tailored workplace agreements that protect those interests.

Toward the end she makes this concession:

Notwithstanding the above, not all non-compete agreements necessarily violate the NLRA. Some non-compete agreements may not violate the Act because employees could not reasonably construe the agreements to prohibit their acceptance of employment relationships subject to the Act’s protection, for example, provisions that clearly restrict only individuals’ managerial or ownership interests in a competing business, or true independent-contractor relationships. Moreover, there may be circumstances in which a narrowly tailored non-compete agreement’s infringement on employee rights is justified by special circumstances.
In a footnote in the paragraph immediately above, she also states that a non-compete agreement that may not violate the NLRA may nonetheless violate other federal law.

In light of this memo, we suggest to our clients that they have attorneys experienced in non-compete agreements review their employment agreements to see whether non-compete clauses should be removed. We can help with this issue. Please let us know.

Seth Nehrbass, Patent Attorney, New Orleans, 6 June 2023, SNehrbass@patents.gs, 504-813-8815.