Watch out for those boiler-plate post-employment non-compete clauses!!
The General Counsel of the National Labor Relations Board (“NLRB”) has issued a memo that addresses non-compete clauses in employment agreements for non-supervisory employees. It provides her guidance on their potential violation of the National Labor Relations Act (“NLRA”). The NLRA is a Federal law that governs the rights of non-supervisory employees.
The General Counsel’s memo is not a law and is not a government regulation. It’s her position on what the law means – influential but not determinative. However, it serves as an indication that the NLRB intends to closely scrutinize claims involving non-competes and potentially prosecute them as unfair labor practices. Moreover, the memo provides insights into the General Counsel’s interpretation of Federal law regarding the validity of non-competes.
And it’s issued in an environment in which these type of post-employment restrictions are receiving increased scrutiny. An increasing number of states already restrict or prohibit the use of post-employment non-compete clauses, and the Federal Trade Commission is also considering a ban on their use. While no Federal law expressly bans non-competition agreements, it’s worth exploring the key points and implications of this memo in light of the rapidly changing legal landscape:
The Issue
In the memo, the General Counsel firmly asserts that inclusion or enforcement of non-compete clauses in employment or severance agreements with non-management workers would violate the NLRA except in limited circumstances. The NLRA aims to protect employees’ rights to engage in concerted activities for the purpose of improving their working conditions. The General Counsel has advised that the imposition of non-competes solely for employee retention or to protect the employer’s investment in training will generally be found to violate the NLRA.
While the memo recognizes that certain situations may justify a narrowly tailored non-compete agreement, it emphasizes that such circumstances are unlikely to apply to low-wage or middle-wage workers. Non-compete clauses should also not unduly restrict employees’ ability to quit or change jobs, thereby limiting their access to other employment opportunities. If a non-compete is overly broad in this regard, it may be considered by the NLRB as problematic.
Appropriate justifications include the use of narrow non-compete clauses for safeguarding trade secrets, proprietary interests or in cases involving genuine independent contractor relationships.
Employer Options
While the memo cautions against overreliance on non-compete agreements, it is essential for employers to consider alternative strategies to protect their legitimate business interests. One effective approach is to implement robust confidentiality and non-disclosure agreements, which can safeguard trade secrets, proprietary information and client relationships. By emphasizing the importance of maintaining confidentiality and prohibiting the unauthorized use or disclosure of sensitive information with well-drafted agreements, employers can still mitigate the risks associated with post-employment competition.
Furthermore, employers can explore the option of implementing non-solicitation agreements or non-recruitment provisions, which restrict departing employees from actively soliciting or recruiting their former colleagues or clients for a certain period after leaving the company. Such agreements can help prevent the immediate depletion of talent and clients while striking a balance between protecting the employer’s interests and allowing employees to exercise their rights to seek new employment opportunities.
At Crowley Law, our experienced attorneys are well-versed in employment law and can provide comprehensive guidance on drafting, reviewing and negotiating employment agreements. We understand the nuances surrounding non-compete clauses and can help you navigate the evolving legal landscape to ensure compliance with applicable regulations while protecting your business interests. Whether you need assistance in implementing alternative strategies, such as non-disclosure agreements or non-solicitation provisions, or require advice on general employment matters, our team is dedicated to providing tailored solutions to meet your specific needs.
Contact us today at (908) 663-8253 to learn how we can assist you in effectively managing your employment agreements and navigating the complexities of non-compete clauses.
