The General Counsel of the National Labor Relations Board (NLRB) on May 30 issued Memorandum 23-08 (GC memo) outlining “her view that the proffer, maintenance, and enforcement noncompete provisions in employment contracts and severance agreements violate the National Labor Relations Act [NLRA] except in limited circumstances.”
The U.S. Chamber has come out against this memo, calling the GC’s interpretation an “extreme and blatantly unlawful overreach.” The GC memo presents another example of the current General Counsel’s expansive reading of the NLRA, and it follows a proposal by the Federal Trade Commission (FTC) to ban noncompete clauses, which the agency announced in January based on the legally dubious premise that noncompetes constitute an unfair method of competition under Section 5 of the Federal Trade Commission Act.
For her part, the NLRB General Counsel argues that noncompete provisions violate Section 7 of the NLRA, which protects the right of employees “to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”
The GC Memo notes that the Board is currently considering a case known as Stericycle, and the General Counsel urged the Board in that case to find that “a provision in an employment agreement violates [the NLRA] if it reasonably tends to chill employees in the exercise of Section 7 rights unless it is narrowly tailored to address special circumstances… .” According to the GC memo, “non-compete provisions are overbroad” and chill employees’ Section 7 rights.
More specifically, the General Counsel argues that:
“these agreements interfere with employees [sic] ability to: 1. concertedly threaten to resign to secure better working conditions; 2. carry out concerted threats to resign or otherwise concertedly resign to secure improved working conditions; 3. concertedly seek or accept employment with a local competitor to obtain better working conditions; 4. solicit their co-workers to go work for a local competitor as part of a broader course of protected concerted activity; 5. seek employment, at least in part, to specifically engage in protected activity, including union organizing, with other workers at an employer’s workplace.”
The General Counsel further asserts that “it is no defense that employees contractually agreed to any infringement on their Section 7 rights because employees cannot waive those rights in individual contracts.”
To say that the entire memo is a stretch of logic is an understatement. The General Counsel acknowledges that “extant Board law does not unequivocally recognize a Section 7 right of employees to concertedly resign from employment,” but then goes ahead to assert that as a right that is somehow violated by noncompetes. Moreover, the entire premise of her memo, that employees will be “chilled” in exercising their Section 7 rights if they have signed a noncompete, is speculative at best and is hardly a sound justification for banning a practice that has been legal since the founding of the Republic.
For now, this is just the GC’s theory. To make it official policy, the Board itself will have to accept her filing in Stericycle. In the meantime, however, she can issue unfair labor practice charges against employers that have noncompetes, and it will be up to the employer to decide if they just wish to settle or appeal those charges up the line. Eventually, one of these charges is likely to wind up in federal court. The notion that an individual is not free to waive a right or willingly enter into a contract has not been met with much enthusiasm in recent years, but the General Counsel seems willing to bet that things will be different on this issue. Time will tell if that bet is a good one.
About the authors
Sean P. Redmond
Sean P. Redmond is Vice President, Labor Policy at the U.S. Chamber of Commerce.
