NLRB Counsel to Seek Legal Action Over Noncompete Clauses
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In a memo to regional directors and officers, National Labor Relations Board General Counsel Jennifer Abruzzo has pledged to pursue legal action against “certain employers” who require nonsupervisory employees to sign noncompete agreements.
“In workplaces across America, many employers are requiring their employees to sign noncompete agreements to obtain or keep their jobs, or as part of a severance agreement,” Abruzzo said in the memo May 30. “Generally speaking, noncompete 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.”
Abruzzo’s memo encourages NLRB regional officials to “submit to advice cases involving noncompete provisions that are arguably unlawful, as well as arguably meritorious special circumstances defenses.”
“In appropriate circumstances, regions should seek make-whole relief for employees who, because of their employer’s unlawful maintenance of an over-broad noncompete provision, can demonstrate that they lost opportunities for other employment, even absent additional conduct by the employer to enforce the provision,” the memo said. “In this regard, regions should seek evidence of the impact of over-broad noncompete agreements on employees and, where applicable, present at trial evidence of any adverse consequences, including specific employment opportunities employees lost because of the agreements.”
In her memo, Abruzzo quotes an estimate that approximately 18.1% of American workers — roughly 28 million individuals — are subject to a noncompete agreement, including approximately 13.3% of workers earning less than $40,000 per year.
Abruzzo’s memo comes on the heels of a recent similar effort by the Federal Trade Commission with the same aims as Abruzzo.
The FTC in January issued a noncompete clause proposed rule declaring that it is an unfair method of competition for an employer to “enter into or attempt to enter into a noncompete clause with a worker; to maintain with a worker a noncompete clause; or, under certain circumstances, to represent to a worker that the worker is subject to a noncompete clause.”
The FTC proposal received more than 20,000 written comments, including one in opposition from American Trucking Associations.
“As a fundamental matter, while there are legitimate public policy concerns about the excessive use of restrictive employment covenants like noncompetition agreements, especially for line production employees, the FTC lacks the legal authority to regulate in this area,” ATA wrote. “As a policy matter, the broad-brush proposal is also harmful broadly and especially to those FTC seeks to protect.
“Indeed, if finalized, the direct result will be a decrease in employer-provided training for valuable, personal, portable credentials such as commercial driver’s licenses. This would exacerbate the already tight labor market for commercial truck drivers, also leading to consumer harm — notably a subject actually within the FTC’s jurisdiction — from corresponding damage to our already fragile supply chain.”
“Abruzzo’s attack follows her earlier pronouncement that confidentiality and nondisparagement provisions in separation agreements will be closely scrutinized, and also joins the federal government’s broader movement to restrict or eliminate noncompete agreements,” said a law alert issued by the Indianapolis-based transportation law firm of Scopelitis, Garvin, Light, Hanson & Feary.
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“It remains to be seen whether Abruzzo’s push will find support with the full NLRB, or whether, instead, her efforts will be recognized by the NLRB as the overreach in agency power that it seems.”
The Owner-Operator Independent Drivers Association supported the FTC’s proposal.
“No matter the circumstance, we have found that noncompete clauses are harmful to the trucking industry,” OOIDA wrote in comments. “OOIDA concurs with FTC’s findings that noncompete clauses have negatively affected competition in labor markets, resulting in reduced wages for workers across the labor force, and have restricted individual opportunities to find work. We support FTC’s proposal to prohibit employers from imposing noncompete clauses on workers, including independent contractors.”
