The NLRB has been flexing its muscle this year. First came the McLaren Macomb decision, where the Board found that confidentiality and nondisparagement provisions in severance agreements for non-supervisors violated the National Labor Relations Act. On May 30th the NLRB General Counsel issued a memorandum and took aim at noncompete agreements.
The General Counsel’s memo states that except in limited circumstances the “proffer, maintenance and enforcement ” of noncompete provisions violates the Act, because, in her opinion, noncompete provisions “reasonably tend to chill employees” in the exercise of their Section 7 rights under the Act to engage in concerted activity for mutual aid and protection in their employment. The General Counsel listed five specific types of protected activity under Section 7 that is chilled by noncompete provisions:
- Concertedly threatening to resign to demand better working conditions, because the threats would be futile due to the noncompete;
- Carrying out concerted threats to resign or concertedly resigning in an effort to secure better working conditions;
- Concertedly seeking or accepting employment with a local competitor to obtain better working conditions;
- Soliciting coworkers to go to work for a local competitor as part of a broader course of protected concerted activity; and
- Seeking employment, at least in part, to specifically engage in protected activity with other workers at an employer’s workplace.
The General Counsel opined that facts which are typically recognized by most courts as special circumstances which justify a noncompete, including specialized training and protecting trade secrets, are insufficient to overcome the chilling effect on Section 7 rights. Her rationale is that less restrictive means, such as a longevity bonus and a confidentiality agreement, protect those interests without the unreasonable chilling effect.
The General Counsel opined that noncompetes that only restrict managerial or ownership interests in a competing business and noncompetes with a true independent contractor do not violate the Act. She also stated that there may be other special circumstances to justify a narrowly tailored noncompete that would not violate the Act.
The General Counsel also encouraged the Board to award make whole relief, lost pay and benefits for example, if there is proof that an overbroad noncompete caused the employee to lose opportunities for other employment.
The memo is not law, but you can be certain that the Board with an existing or future case will try to make it the law in the near future.