Non-Competes Under Attack (Again)

by Ashley Trotto, Esq. and Summer Associate Kevin Escalona

The war against non-compete agreements has gained a new ally.  In a memorandum issued on May 30, 2023 (the “Memo”), the General Counsel (“GC”) for the National Labor Relations Board (“NLRB”) declared that most non-compete agreements violate the National Labor Relations Act (“NLRA”).

The GC opines that overbroad non-competes are unlawful because they tend to chill employees from exercising their rights under Section 7 of the NLRA, which protects employees’ right to take collective action to improve working conditions. Specifically, she opines that non-competes could reasonably be construed to deny employees the ability to quit or change jobs because employees know that they will have greater difficulty replacing their lost income if they are discharged for exercising their statutory rights.

The Memo concludes that non-competes are a legitimate risk to several Section 7 rights, including, most broadly, the right to concertedly seek or accept employment with a local competitor to obtain better working conditions.  

Although the Memo is far-reaching, the GC does admit that a non-compete may be considered lawful if it is “narrowly tailored to address special circumstances justifying the infringement of employee rights.” Unfortunately, no specific examples of such “special circumstances” were provided. The GC did, however, indicate that employer justifications will rarely be considered reasonable in situations involving non-compete provisions “imposed on low-wage or middle-wage workers who lack access to trade secrets or other protectable interests.”

Given this latest attack on non-competes, employers should proceed with caution. Our continued recommendation is that employers carefully analyze which employees should be subject to a non-compete and ensure that any resulting agreement is narrowly tailored to serve a legitimate business interest. As always, we are happy to review any document or policy to ensure continued legal compliance.