Published
October 11, 2024
The National Labor Relations Board (NLRB) has an important job to do. By statute it is meant to ensure that workers have a process to join unions and that their right to engage in concerted activities, such as requesting changes in working conditions, is not infringed. For more than 80 years, the NLRB has done so. Unfortunately, in the Biden-Harris administration, the NLRB has sought to expand its mandate using novel and creative interpretations of the law.
For example, ln October 7, General Counsel Jennifer Abruzzo issued a memo addressing non-compete agreements and so-called “stay-or-pay” provisions. The memo builds on guidance from May 2023, which highlighted her hostility toward these agreements that she deems overly restrictive under the National Labor Relations Act (NLRA).
Abruzzo’s memo reiterates her intent to prosecute employers who enforce non-compete and stay-or-pay provisions. The memo suggests that non-compete agreements often deter employees from exercising their rights due to fear of various repercussions. Never mind that since the founding of the Republic, these agreements have been governed by state law. They have never been regulated under the NLRA.
Abruzzo argues that non-compete agreements can be “self-enforcing,” meaning employees may avoid seeking better opportunities, which could limit job mobility and suppress wages, an issue a bit afield from the NLRB’s mandate, assuming such agreements are voluntary. In other words, employees should be free to waive a right to pursue employment opportunities.
Abruzzo also highlighted stay-or-pay provisions, including training or educational repayment agreements and bonuses tied to mandatory stay periods. Employers use these agreements to ensure that the resources they invest in training a worker doesn’t immediately walk out the door to another company. Were that to become standard practice, no employer would invest in training, and workers would lose opportunities to learn valuable skills. The memo, however, states that these provisions can suppress union organizing and other activities by creating a financial disincentive for employees to leave, and it advises employers to ensure these provisions are narrowly tailored.
The memo also proposes remedies to address their effects and suggests that simply rescinding supposedly unlawful provisions is insufficient. Instead, she advocates for “make-whole” relief to restore employees to the position they would have been in if the allegedly unlawful provision had not existed.
For employers, Abruzzo’s memo reiterates that her office will take a stringent approach in prosecuting alleged violations, and employers may face significant penalties if found in breach of the law. Given the activist bent of the current NLRB majority, that seems increasingly likely.
About the authors
Sean P. Redmond
Sean P. Redmond is Vice President, Labor Policy at the U.S. Chamber of Commerce.
