RBS News

Written By: Peter M. O’Grady, Esq. | 2023-06-20

General Counsel for the NLRB Weights in on Non-Compete and Non-Solicitation Agreements

Jennifer Abruzzo, General Counsel for the National Labor Relations Board (the “NLRB”
or the “Board”), issued a Memorandum on May 30, 2023, discussing the enforceability of non-
compete and non-solicitation agreements under Section 7 of the National Labor Relations Act
(“NLRA”). General counsel for the NLRB is tasked with investigating and prosecuting unfair
labor practices under the NLRA.

Many employers frequently utilize non-compete and non-solicitation agreements to
protect the investments they make in their employees and to prevent unfair competition from
competitors. Section 7 of the NLRA guarantees union and non-union employees alike the right
to organize, to form or join a union, to bargain collectively, to engage in other concerted
protected activities or to band together for mutual aid or protection. The NLRA also protects an
employee’s right to refrain from any such activities. Under Ohio law, non-compete and non-
solicitation agreements are lawful if they are reasonable in time and geographical scope, and if
the agreements protect a legitimate business interest of the employer.

Abruzzo identifies five areas where non-compete agreements are potential violations of
the NLRA and, thus, illegal. In her opinion, non-compete agreements infringe on union and non-
union employees protected rights if they “chill” an employee’s ability to:

1. En masse threaten to resign to demand improved working conditions;
2. Carrying out simultaneous threats to resign or simultaneously resigning to receive
   improved working conditions;
3. Jointly seek or accepting employment with improved working conditions;
4. Solicit fellow employees to work for local competitors; and
5. Seek employment with a new employer to promote unionization there.

Abruzzo’s Memorandum was sent to all NLRB regional directors soliciting them to
report all non-compete agreements that are potentially unlawful. This follows a January of 2023
proposed Federal Trade Commission (“FTC”) rule that, if passed, would categorically deem all
non-compete agreements as “unfair methods of competition,” and would require employers to
rescind all existing non-compete agreements. The FTC rule is discussed here

Abruzzo’s Memorandum does state that “…not all non-compete agreements necessarily
violate the NLRA.” To be lawful, these agreements would have to be “narrowly tailored to
special circumstances” such as restricting only an individual’s managerial or ownership interest
in a competing business (supervisors are essentially exempt from the NLRA), independent-
contractor agreements, and other special circumstances.

This Memorandum continues a federal trend seeking to eliminate non-compete agreements. Moving forward in light of this second federal initiative this year, employers should consult with experienced employment law counsel to strategize the use of such agreements in the future.

As always, the attorneys at RBS are available to help navigate these ever-evolving
changes. Please reach out to RBS to review of any existing or new agreements.