On May 30, 2023, the National Labor Relations Board’s General Counsel, Jennifer Abruzzo, issued a Memorandum stating that, except in limited circumstances, the proffer, maintenance, and enforcement of non-compete agreements between employers and employees violate Section 8(a)(1) of the National Labor Relations Act (NLRA).
Per the Memorandum, non-compete provisions are overbroad when they reasonably tend to chill employees’ ability to quit or change jobs by cutting off their access to other employment opportunities that they are qualified for based on their experience, aptitudes, and preferences as to type and location of work. The memorandum notes that it is an unfair labor practice, in violation of Section 8(a)(1), for an employer to interfere with, restrain, or coerce employees in the exercise of rights guaranteed in Section 7 of the NLRA. NLRA Section 7 protects employees’ right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other “concerted activities” for the purpose of collective bargaining, or other mutual aid or protection.
Employers planning to offer non-compete agreements to non-supervisory employees as a condition to them obtaining or keeping their jobs, or as part of severance agreements, are strongly encouraged to consult with their employment law attorneys to address compliance with the NLRB’s stated policy.
NLRB Issues Decision Overruling SuperShuttle Decision
In other news, on June 13, 2023, the National Labor Relations Board issued a decision overruling the 2019 Trump-era decision in SuperShuttle DFW, Inc. and Amalgamated Transit Union Local 1338, Case 16–RC–010963, which had made it easier for employers to show their workers are independent contractors and, therefore, lacked the right to unionize. The SuperShuttle decision had required the NLRB to apply the multi-factor common-law agency test articulated by the U.S. Supreme Court in NLRB v. United Insurance Co. of Amer., 390 U.S. 254 (1968), and the Restatement (Second) of Agency §220 (1958), “through the prism of entrepreneurial opportunity when the specific factual circumstances of the case make such an evaluation appropriate.” Those factors include, without limitation, the employer’s control over the worker, whether the worker is engaged in a distinct occupation or business, the worker’s skill, and whether the work is part of the employer’s regular business.
The reversal of the SuperShuttle decision restores the NLRB’s 2014 Obama-era standard, set forth in FedEx Home Delivery, 361 NLRB 610 (2014), for determining whether a worker is an employee or independent contractor. Under FedEx, the Board considers “entrepreneurial opportunity” as just one aspect of a factor that asks whether the evidence tends to show that the putative contractor is, in fact, rendering services as part of an independent business.
Should a worker be treated as an employee or an independent contractor? In the labor context, the question is critical to employers, because the NLRA protects employees’ right to unionize, bargain collectively, and engage in concerted activities to improve job conditions, as set forth above. Independent contractors, by contrast, lack these rights.
Employers are again urged to exercise caution and to consult with employment law counsel in determining whether their workers should be classified as employees or independent contractors.
