By: Chris Gantt-Sorenson and Catherine Langdon (2023 Summer Law Clerk)
The National Labor Relations Board (NLRB) has joined the bandwagon of federal agencies attacking non-compete agreements in its recently released Memorandum stating certain non-compete agreements violate a worker’s right to take collective action to improve their working conditions—a right that employees are entitled to under the National Labor Relations Act (NLRA). The NLRB believes overbroad non-compete agreements that prohibit an employee’s ability to leave one job for another can create an imbalance of power between employers and employees where employees are faced with difficulty in finding new work to replace lost income after leaving one job for better working conditions. The NLRB referenced a specific non-compete provision that restricted employment with a competing business for a two-year period in the entirety of the state where the employees resided – something that restrictive covenant law in many states, including South Carolina, actually bars. However, the NLRB specifically discussed the agreement was overly broad because it applied to low-wage workers. The NLRB and other agencies are hinting that any restrictive covenants applicable to low-wage earners might not be enforceable on that fact alone.
The NLRB weaves its objections to non-compete agreements into a violation of NLRA rights when the agreements hinder workers’ ability to seek better work environments with their employer’s local competitors, noting that limits the ability of those employees to effectuate better working conditions within an industry. Actions taken by employees demanding safer and better working conditions, the NLRB says, are protected by the NLRA and threatened by increasingly aggressive non-compete agreements.
The NLRB concedes non-compete agreements could be enforceable if written to place as few restrictions as possible on an employee’s rights in demanding better working conditions or seeking new jobs, providing the example that an employer’s legitimate business interest in protecting proprietary or trade secret information can be covered by a non-compete agreement that protects only those specific interests, which implies the permissible agreement is a nondisclosure agreement and not a non-compete agreement. The NLRB also explains an agreement that clearly restricts only a worker’s managerial or ownership interests in a competing business could be seen as enforceable and not in violation of the NLRA.
The Memorandum invites NLRB regional offices to submit any non-compete agreements for advice as to whether they restrict NLRA rights as outlined in the Memorandum.
Catherine Langdon is a 2023 Summer Law Clerk in Haynsworth Sinkler Boyd’s Columbia office. She is a student at the University of South Carolina School of Law and expects to graduate in May 2024. She received her bachelor’s degree from Wofford College.