U.S. News: Noncompete Clauses Break Labor Law, NLRB Staff Memo Says.

"Noncompete clauses violate the federal law that governs union organizing and workers' rights to collective action, according to a memo released Tuesday by the National Labor Relations Board's top lawyer.

The memo by Jennifer Abruzzo, the agency's general counsel, was sent Tuesday to field staff and regional directors whose job is to enforce the National Labor Relations Act.

Noncompete clauses, which typically bar workers from taking jobs with rival companies for a period of time, interfere with workers' ability to retain their bargaining power in labor disputes and with their right to collectively change jobs or threaten to change jobs in search of better working conditions, Abruzzo wrote.

The change aligns with actions from other agencies, most notably the Federal Trade Commission, which will soon release a final rule based on its January proposal to ban all or most noncompete clauses. Such clauses affect nearly one in five American workers, according to the agency.

Many companies say noncompete agreements are necessary to protect trade secrets, which can include confidential information such as customer data as well as intellectual property such as technical formulas and processes. The U.S. Chamber of Commerce has said courts provide an adequate avenue for determining when noncompete clauses are abusive.

Long associated with higher-paid managers, the clauses have been imposed on lower-wage workers such as security guards, baristas, hairstylists and others who lack access to trade secrets, confidential information or strategic plans. The FTC estimates that getting rid of noncompetes would boost employee earnings annually by up to $296 billion.

Abruzzo's memo suggests noncompete clauses should be prohibited in most circumstances because they violate or chill workers' right to act collectively. For example, workers subject to noncompete clauses would see a threat to resign collectively as futile given their inability to accept new jobs in their chosen fields.

The memo itself doesn't create a binding rule for employers. But staff members in NLRB offices around the country can submit cases to Abruzzo's office challenging noncompete clauses, she wrote, and if a case comes before the five-member board and a majority agrees with her interpretation, the case will become binding." [1]

1. U.S. News: Noncompete Clauses Break Labor Law, NLRB Staff Memo Says. Weber, Lauren. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 31 May 2023: A.2.