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Non-Compete Clauses Deemed Violation Of NLRA
On May 30, 2023, the General Counsel of the National Labor Relations Board (NLRB) issued a memorandum clarifying that requiring employees to sign non-compete agreements to obtain or keep their jobs, or as part of severance agreements, interfere with employees’ exercise of their rights under Section 7 of the National Labor Relations Act (NLRA).
Section 7, in particular, protects employees’ right to self-organization, to form, join, or assist labor organizations, and to bargain collectively. The General Counsel said that non-compete provisions are overbroad and reasonably tend to chill employees in exercising their rights under Section 7 when the provisions deny employees the ability to quit or change jobs. For example, the provisions interfere with Section 7 if they cut off employees’ access to other employment opportunities that they are qualified for based on experience, aptitude, and preferences as to type and location of work.
Generally speaking, this denial of access to employment opportunities is a violation of Section 7 activity because employees know they will have greater difficulty replacing their lost income if they are discharged for organizing and acting together to improve working conditions. In addition, an employer’s former employees are unlikely to reunite at a local competitor’s workplace, and therefore be unable to leverage their prior relations to encourage each other to exercise their rights to improve working conditions in their new workplace.
The General Counsel also noted that non-compete provisions can be construed as denying employees the ability to quit or change jobs by cutting access to other employment opportunities.
The full opinion letter can be found here.