The Division of Advice (the “Division”) of the National Labor Relations Board (the “NLRB”) recently released an advice memorandum examining the lawfulness of various key provisions – including non-solicitation, non-disclosure, and return of property provisions – contained in an employer’s standard employment agreement.  The Division’s approach in this particular case serves as a helpful guide for how the agency will likely assess other similar agreements in the future. 

Notably, the employment agreement at issue in this case included a self-described “non-compete” provision, which was essentially a customer non-solicitation provision that prohibited the employee from soliciting the employer’s customers following a separation from employment. The NLRB concluded this “non-compete” provision did not implicate the Section 7 concerns raised by the NLRB General Counsel in Memorandum GC 23-08 or otherwise violate the National Labor Relations Act (the “NLRA”) because its limited restrictions did not foreclose the employee from accessing other employment opportunities. Instead, employees were “only restricted from soliciting the Employer’s existing customers in order to provide similar services for a period of one year.”

The Division also applied the NLRB’s standard in Stericycle, Inc. for purposes of assessing the lawfulness of other provisions in the employment agreement. The Division noted that because the employer required all employees to sign identical employment agreements, the provisions considered in the instant case constitute work policies or rules properly subject to the Stericycle analysis. Specifically:

• The employment agreement included a business disclosures provision (i.e., confidentiality), which prohibited the disclosure or use of information relating to the business of the employer or its customers. The Division concluded such confidentiality provision was lawful because it focused solely on trade secrets and other proprietary information and therefore, could not reasonably be interpreted to chill the exercise of Section 7 rights. Notably, this non-disclosure provision did not refer to employee information, wage information, or anything else relating to terms and conditions of employment. The Division emphasized this “lack of any mention of employee information or things related to the terms and conditions of employment” distinguished this policy from other work rules the NLRB has found unlawful.
• The termination provision in the employment agreement required the surrender of all company property on termination of employment. The Division concluded this provision was lawful because it did not implicate information that may be utilized in connection with protected concerted activity and therefore, could not reasonably be interpreted to chill the exercise of Section 7 rights.
• Lastly, the Division found the employee duties provision in the employment agreement unlawful under the NLRA. This provision prohibited the employee from engaging in “any activity competitive with or adverse to the [employer’s] business or welfare.” The Division concluded this provision was unlawfully overbroad under Stericycle because economically dependent employees contemplating Section 7 activity could reasonably interpret its language to prohibit union organizing or other protected concerted activity that the employer may deem to be “adverse” to the employer’s business.

In light of the Division’s advice memorandum, employers should carefully review their employment agreements to avoid interfering with employees’ rights to engage in “protected concerted activity” under Section 7 of the NLRA. 

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