An estimated 38% of workers have been subject to a noncompete agreement at some time in their careers, according to US Government Accountability Office, but the agreements are “overly broad” and violate the National Labor Relations Act, according to National Labor Relations Board General Counsel Jennifer Abruzzo.
“Noncompete provisions reasonably tend to chill employees in the exercise of Section 7 rights 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,” Abruzzo wrote Tuesday in a memo to regional directors, officers-in-charge and resident officers.
The memo comes as the Federal Trade Commission is proposing to prohibit employers from requiring workers to sign such agreements.
“This denial of access to employment opportunities interferes with workers engaging in Section 7 activity in a number of ways—for example, workers know that they will have greater difficulty replacing their lost income if they are discharged for exercising their statutory rights to organize and act together to improve working conditions; their bargaining power is undermined in the context of lockouts, strikes and other labor disputes; and their social ties and solidarity leading to improvements in working conditions at workplaces are lost as they scatter to the four winds.”
Not all noncompetes are unlawful, Abruzzo said. For example, she noted, agreements that are not overly broad would include provisions that clearly restrict only individuals’ managerial or ownership interests in a competing business or true independent-contractor relationships.
But “a desire to avoid competition from a former employee is not a legitimate business interest that could
support a special circumstances defense,” she wrote.
The memo also noted that the general counsel is committed to an interagency approach to restrictions on the exercise of employee rights, including limits to workers’ job mobility, including information sharing and referrals to other agencies. NLRB, the Federal Trade Commission and the Department of Justice’s Antitrust Division last year entered into memoranda of understanding to address the anticompetitive effects of noncompete agreements.