Wait, What? NLRB GC Argues Non-competes Violate the NLRA

Patrick Scully

National Labor Relations Board (“NLRB” or “Board”) General Counsel Jennifer Abruzzo is redefining regulatory overreach. In a memorandum that reads more like a college term paper than a legal opinion, GC Abruzzo argues that non-compete agreements violate the National Labor Relations Act (“NLRA”). GC 23-08 Non-Compete Agreements That Violate the National Labor Relations Act (May 30, 2023).

Typically, agreements that govern post-employment conduct wouldn’t seem to be within the realm of the NLRB. However, in GC Abruzzo’s view, such agreements could “chill” employees’ Section 7 rights

when the provisions could reasonably be construed by employees to deny them the ability to quit or change jobs by cutting off their access to other employment opportunities that they are qualified for based on their experience, aptitudes, and preferences as to the type and location of work.  GC23-08 at 2.

If that wasn’t enough, she goes on to explain

Generally speaking, this denial of access to employment opportunities chills employees from engaging in Section 7 activity because: employees know that they will have greater difficulty replacing their lost income if they are discharged for exercising their statutory rights to organize and act together to improve working conditions; employees’ bargaining power is undermined in the context of lockouts, strikes, and other labor disputes;  and, an employer’s former employees are unlikely to reunite at a local competitor’s workplace, and, thus be unable to leverage their prior relationships—and the communication and solidarity engendered thereby—to encourage each other to exercise their rights to improve working conditions in their new workplace. Id.

The amount of conjecture entailed in GC Abruzzo’s “standard” is quite jarring. Furthermore, it may be the first time anyone has imagined employees “reuniting” at a future workplace to (of course) engage in some (as yet undefined) protected concerted activity.

GC Abruzzo describes five distinct types of protected activity that non-competes allegedly “chill.”  While they are all troubling, the most prominent example is “concertedly resigning” from employment. Although the Board has not recognized concerted resignation as protected activity, GC Abruzzo is confident that it soon will, thus paving the way for her new theory of liability. Of course, she does not explain why a non-compete would have such an effect. We may have to wait for her brief to hear that argument, which does not seem to be presumptively true.

Among other things, GC Abruzzo also makes clear that she will never consider the prevention of competition from a former employee to be a legitimate business interest. This appears to be her logical starting point, though it is addressed in the last paragraphs of the memorandum, which references, but does not describe, the “special circumstances” that might save a non-compete.

Given the dearth of legal citation in the memorandum, GC Abruzzo’s conjecture-driven analysis is likely a function of her desire to ‘join the party’ of those attacking non-compete agreements. Hopefully, the NLRB will resist her attempt to expand the NLRA’s jurisdiction beyond the current employment relationship. But given the current composition on the Board, we wouldn’t bet on it.