DISCLAIMER: This post contains general information about the FTC ban and non-competition agreements. It is not legal advice. If you are using non-compete agreements in your business, we strongly recommend you schedule a consultation with an employment attorney in each of the US jurisdictions where you operate.
In a recent post, I discussed how the Federal Trade Commission (FTC)’s ban on non-competition, or non-compete, clauses was not too surprising. New York State (NYS) has restricted such agreements due to the imbalance of power when these agreements are signed. They also keep wages low and hinder innovation.
In 2022, the National Labor Relations Board (NLRB) entered a Memoranda of Understanding (MOU) with the Department of Justice’s (DOJ) Antitrust Division to address the impact of non-compete agreements. In 2023, the NLRB’s General Counsel (GC) sent a memorandum to all Regional Directors, Officers-in-Charge, and Resident Officers regarding her views on non-compete provisions in employment contracts and severance agreements. Although not widely publicized, the 2023 memo hinted that more restrictions were coming because non-competition clauses:
- Violate the National Labor Relations Act (NLRA). The GC asserted that overly broad non-compete provisions discourage employees from exercising their rights under Section 7 of the NLRA, which protects their ability to take collective action to improve working conditions.
- Interfere with employee rights. Non-compete agreements are believed to hinder with employees’ abilities to:
- Threaten to resign collectively to secure better working conditions
- Seek improved conditions in employment with competitors
- Engage in protected activity such as union organizing
- Keep employee wages low. The memo highlighted that non-compete provisions limit employees’ access to other employment opportunities, which might result in lost income and weakened bargaining power during labor disputes.
