On May 30, 2023, Jennifer Abruzzo, General Counsel for the National Labor Relations Board (the “NLRB”), issued a memo arguing that requiring employees to sign non-competition agreements violates the National Labor Relations Act (the “NLRA”). While this does not create legal precedent, it may be a strong signal of what is to come when the NLRB has a chance to review a non-competition agreement.

In her memo, the General Counsel argues that overbroad non-competition agreements have the tendency to chill workers’ rights under the NRLA, including the right to organize. While she concedes that agreements that are “narrowly tailored to special circumstances justifying the infringement on employee rights” can be lawful, she claims that employers’ business interests in retaining employees or protecting their investments in training workers “are unlikely to ever justify an overbroad non-compete provision because U.S. law generally protects employee mobility.”  Similarly, the General Counsel also argues that scenarios in which an employer imposes overbroad non-competition agreements on low or middle wage workers who do not have access to trade secrets are likely not justifiable. Of note, it appears that protections for confidential and trade secret information can still be an adequate basis to impose non-competition requirements.  Conservative employers who wish to impose non-competition agreements should focus their efforts on protecting this information to avoid unwanted NLRB scrutiny.

Abruzzo’s memo follows the U.S Federal Trade Commission’s (the “FTC”) issuance of a proposed rule, earlier this year, that would make non-competition agreements unenforceable. The FTC argues that those agreements constitute an unfair method of competition and therefore violate the Federal Trade Commission Act.

For now, non-competition agreements are enforceable in many states subject to each state’s specific requirements. Some states like California generally prevent the enforcement of non-competition agreements, while others generally allow them if they are reasonable in duration and scope. However, now at least two agencies have them in their crosshairs and all bets are off as to the future of non-competition agreements.  Stradling attorneys will continue to monitor the situation and keep employers updated on any additional developments.