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NLRB Files Complaint Over Employer's Use of Noncompetes and Reimbursement Requirements

    Client Alerts
  • September 15, 2023

Earlier this year, the National Labor Relations Board’s General Counsel released a memorandum taking the position that many employers’ use of noncompetition and related agreements violates the National Labor Relations Act by interfering with the employees’ right to bargain with their employer and to seek other employment. The memo argues that the agreements are used to prevent employees from using the threat of leaving for a competitor to negotiate for better wages and other terms and conditions of work.

Last week, the NLRB followed up on this view by filing unfair labor practice charges against an Ohio spa that allegedly required employees to sign noncompete and non-disparagement agreements as a condition of employment. The complaint also alleges that the spa required employees who resigned to repay training costs, characterizing this as another tool for preventing workers from negotiating for higher wages.

It is not surprising that the NLRB would test its legal theory in a matter involving relatively low-wage workers. These employees in general have little bargaining leverage with their employers, often lacking the means to contest overbroad post-employment restrictions. Independent of these labor law issues, a number of state courts have invalidated such restrictions due to the lack of actual competitive threat from these workers.

The NLRB’s actions are separate from the Federal Trade Commission’s pending effort to declare noncompetes illegal under federal anticompetition laws. In addition, a number of states have recently restricted noncompetes or entirely voided their use. Given these regulatory and legislative efforts, employers should understand that noncompetes no longer serve as a legally unassailable way to stop an employee from leaving to work for a competitor.

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