The National Labor Relations Board (NLRB) has been on a mission to curtail the use of non-compete and related restrictive agreements in employment contracts across the United States. The federal agency has continued its crusade in Ohio by virtue of a recent action filed by the NLRB’s Cincinnati office against Juvly Aesthetics, a business engaged in the operation of medical clinics and spas.

Non-Compete Agreements Under Scrutiny

Non-compete agreements, also known as non-competes or restrictive covenants, have long been a contentious issue in the world of employment law. Non-compete agreements are contractual provisions that restrict employees from working for a competitor, or from starting a competing business for a specified period after leaving their current employer. On the surface, these agreements may seem reasonable to protect a company’s legitimate business interests, such as safeguarding trade secrets, protecting the investment made in training their personnel, or client relationships. However, critics argue that non-competes often go too far, disproportionately favoring employers, hindering employees’ ability to advance their careers, and stifling competition within industries.

NLRB’s Stance on Non-Competes

In recent years, the NLRB has begun to scrutinize non-compete agreements more closely, particularly when they are used to restrict employees’ rights to engage in activities protected by the National Labor Relations Act (NLRA). The NLRB has warned that overly broad non-competes could deter employees from discussing workplace conditions, forming unions, or advocating for their rights – actions explicitly protected by federal labor law. Such efforts have been echoed by other federal agencies, including the Federal Trade Commission.

NLRB Action Against Juvly Aesthetics

In its action against Juvly, the NLRB alleges the spa company violated the NLRA by forcing its employees to sign unlawful confidentiality, non-disparagement, non-compete, and non-solicitation agreements. The restrictive covenants at issue in the action against Juvly preclude employees from “practicing aesthetic medicine” and “providing other services” within 20 miles of any Juvly location for a period of two years following employment.

The action additionally claims the spa company violated the NLRA by forcing employees to repay the hefty cost of initial ($75,000) and supplemental ($30,000) job training – in full – if they leave the business within one year (this amount was prorated if the employee left within two years). The NLRB is seeking reimbursement and recission of such provisions on behalf of two such employees, one who paid $60,000 and the other $50,000 for such training following their separation from the company.

The action coincides with a May 2023 memo from NLRB General Counsel Jennifer Abruzzo, claiming that such restrictive covenants are overbroad and chill workers’ organization and collective bargaining rights under the NLRA “when the provisions could reasonably be construed by employees to deny them the 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.”

Shifting Employment Contract Dynamics

As the NLRB continues to scrutinize these agreements for potential NLRA violations, the landscape of employment contracts may undergo significant changes, ensuring that non-compete agreements strike a fair balance between protecting employers’ legitimate interests and safeguarding the rights and mobility of the American workforce.