On May 30, 2023, the General Counsel for the National Labor Relations Board (NLRB) issued a memorandum informing the Labor Board’s Regional Directors of the GC’s stance that non-compete clauses for employees protected by the National Labor Relations Act (the Act) in employment contracts and severance agreements violates federal labor law.
Following closely on the heels of the NLRB’s decision in McLaren Macomb (limiting confidentiality and non-disparagement provisions in severance agreements), Abruzzo’s memo contends that an overly broad non-compete clause violates the Act if it “reasonably tends to chill employees” from engaging in Section 7 activity, unless the non-complete is “narrowly tailored to special circumstances.”
The GC’s Memo is not binding law. It is the latest initiative to limit the use of non-competes since the Federal Trade Commission’s (FTC) announcement in January of 2023. Both the GC and the FTC’s positions are at odds with the majority of states who enforce non-competes. Disputes regarding the enforceability of non-competes are generally resolved by courts, not the NLRB. Employers should continue to review their current restrictive covenants to consider strategies for mitigating the risks in light of these developments.
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