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NLRB General Counsel Targets Non-Compete Agreements as Unlawful

May 31, 2023

On May 30, 2023, the General Counsel for the National Labor Relations Board (“NLRB”), Jennifer Abruzzo, issued GC Memo 23-08 requiring Regional Directors to submit cases involving “arguably unlawful” non-compete agreements to Advice. As in McLaren, the General Counsel’s view is that offering, maintaining and enforcing an overbroad non-compete agreement creates a chilling effect on employee exercise of Section 7 rights. The General Counsel has urged the Board to adopt the standard that a provision in an employment agreement violates the Act if it “reasonably tends to chill employees in the exercise of Section 7 rights unless it is narrowly tailored to address special circumstances justifying the infringement on employee rights.” The General Counsel stated that narrowly tailored non-compete agreements may be justifiable; however, she forecast that it is “unlikely” that an employer’s justification for requiring a non-compete agreement with low and middle-wage workers will be justifiable.

The General Counsel’s Memo provided the following examples of how she believes overbroad non-compete provisions “chill” employees’ ability to engage in protected concerted (group) activity or the individual exercise of Section 7 rights:

  • Discourages employees from threatening to resign in support of a demand for better working conditions;
  • Discourages employees from carrying out group threats to resign for the purpose of securing better working conditions;
  • Prevents employees individually or as group from seeking or accepting employment with a competitor for the purpose of securing better working conditions;
  • Prohibits former employees from soliciting their former co-workers to go to a competitor to secure better working conditions; and
  • Prevents employees from seeking and accepting new employment for the purpose of organizing a new workplace.

The GC Memo sets forth the views of the NLRB’s General Counsel and does not necessarily represent the views of the Board. The standard urged for adoption by the General Counsel was submitted to the Board for consideration in the General Counsel’s brief to the Board in Stericycle, Inc., 04-CA-137660. Varnum’s Labor & Employment Group will continue to monitor and report on this important issue. In the meantime, existing employment agreements and handbook policies regarding non-competition and non-solicitation should be reviewed and updated as necessary. 

Please contact your Varnum attorney with any questions.

2023 Summer associate Charlotte Jolly contributed to this advisory. Charlotte is currently a student at Wayne State University Law School.

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