The NLRB’s fight against Non-Competes for Union Rights

The National Labor Relations Board (NLRB) is trying to take down non-competition and non-solicitation clauses to protect employee rights. They aren’t alone in federal agency efforts to take down restrictive convenants. The Federal Trade Commission (FTC)’s blanket ban and the Department of Justice (DOJ) comment have both argued for the same cause. In fact, the three agencies agreed to a formal collaboration in 2022. Since we covered the FTC’s efforts in our last post, we’re diving into the NLRB's efforts this week.

What is the role of the NLRB with respect to Non-Competes?

The NLRB is a federal agency with the mandate to protect employee rights to organize and improve their working conditions. While their work primarily focuses on union rights, they also work to safeguard fair labor practices.

On May 30, 2023, the NLRB General Counsel issued a statement that non-competes violated the National Labor Relations Act. The agency believes that since the law protects an employee’s right to organize for better working conditions, non-competes that ‘chill’ this right are unlawful. The NLRB believes that broad non-competes prevent employees from threatening to resign or accepting other job offers to receive better conditions.

What action has the NLRB taken to strike out Non-Competes?

Similar to the FTC, the NLRB has taken up potential violations to court. However, the NLRB is unique in that they maintain their own court in the form of an Administrative Law Judge and the Board. While these decisions can be appealed through the US Court of Appeals and ultimately the Supreme Court, their initial review is held through the NLRB system and not the district trial courts.

The most recent judgment on the topic of non-competes and non-solicits is J.O. Mory, Inc. On June 18, 2024, the judge ruled that the 24 month non-solicit and 12 month non-compete were ‘overly broad’ and violated the law. The employer was ordered to remove both provisions and notify current and former employees that they were no longer in effect. It’s important to note that the judge did not rule restrictive convenants to be generally unlawful, just the ones that were considered too broad.

When does the NLRB allow Non-Competes?

Not limited to the NLRB, restrictive convenants have always had exceptions for the sale of a business. After all, you wouldn’t want to buy a company from someone who is just going to turn around and build a competitor to it. In general, the bar for employers to prove that their non-compete is required for “a legitimate and substantial business interest” is incredibly high. Even in cases where it might be justified, the NLRB has recommended incentives such as longevity bonuses as opposed to restrictions.

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One of the employee practices protected by the NLRB is known as salting, where a union member will apply for a job at a similar employer that doesn’t yet have union activity with the goal of starting it. Salting lies on the intersection of the NLRB and non-competes, as the latter makes it more difficult for salting to occur. Just as the FTC is approaching non-competes using their mandate of fostering innovation, the NLRB is doing so based on their mandate of fostering employee organization. Whether either agency will succeed, only time will tell!

For advocacy and beyond,
The Ask Ginkgo Team