Non-Compete Agreements that Violate the National Labor Relations Act

OFFICE OF THE GENERAL COUNSEL

MEMORANDUM GC 23-08

May 30, 2023

TO:

All Regional Directors, Officers-in-Charge,

and Resident Officers

FROM:

Jennifer A. Abruzzo, General Counsel

SUBJECT:

Non-Compete Agreements that Violate the National Labor Relations Act

In workplaces across America, many employers are requiring their employees to

sign non-compete agreements to obtain or keep their jobs, or as part of severance

agreements.1 Generally speaking, non-compete agreements between employers and

employees prohibit employees from accepting certain types of jobs and operating certain

types of businesses after the end of their employment. As explained below, such

agreements interfere with employees’ exercise of rights under Section 7 of the National

Labor Relations Act (the Act or NLRA). Except in limited circumstances, I believe the

proffer, maintenance, and enforcement of such agreements violate Section 8(a)(1) of the

Act.

Section 7 protects employees’ “right to self-organization, to form, join, or assist

labor organizations, to bargain collectively through representatives of their own choosing,

and to engage in other concerted activities for the purpose of collective bargaining or

other mutual aid or protection.”2 It is an unfair labor practice in violation of Section 8(a)(1)

for an employer “to interfere with, restrain, or coerce employees in the exercise of the

rights guaranteed in [S]ection 7.”3 Under the standard I have urged the Board to adopt in

Stericycle, Inc.,4 a provision in an employment agreement violates Section 8(a)(1) if it

reasonably tends to chill employees in the exercise of Section 7 rights unless it is narrowly

1 See Evan P. Starr et al., Noncompete Agreements in the US Labor Force, 64 J. Law & Econ.

53, 60, 64 (2021) (estimating that approximately 18.1 percent of American workers—roughly 28

million individuals—are subject to a non-compete agreement, including approximately 13.3

percent of workers earning less than $40,000 per year). See generally U.S

xercise of Section 7 rights unless it is narrowly

1 See Evan P. Starr et al., Noncompete Agreements in the US Labor Force, 64 J. Law & Econ.

53, 60, 64 (2021) (estimating that approximately 18.1 percent of American workers—roughly 28

million individuals—are subject to a non-compete agreement, including approximately 13.3

percent of workers earning less than $40,000 per year). See generally U.S. Gov’t Accountability

Off., GAO-23-103785, Noncompete Agreements: Use Is Widespread to Protect Business’ Stated

Interests, Restricts Job Mobility, and May Affect Wages (2023).

2 29 U.S.C. § 157. Section 7 also generally protects employees’ right to refrain from such activity.

See id.

3 Id. § 158(a)(1).

4 See General Counsel’s March 7, 2022 Brief to the Board, Stericycle, Inc., Cases 04-CA-137660

et al.

Rescinded 2/14/2025 by Memorandum GC 25-05

2

tailored to address special circumstances justifying the infringement on employee rights.5

The Board already applies a similar standard to provisions in severance agreements.6

And, it is no defense that employees contractually agreed to any infringement on their

Section 7 rights because employees cannot waive those rights in individual contracts.7

Non-compete provisions are overbroad, that is, they 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

ovisions are overbroad, that is, they 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. Generally

speaking, this denial of access to employment opportunities chills employees from

engaging in Section 7 activity because: employees 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;8 employees’ bargaining

power is undermined in the context of lockouts, strikes, and other labor disputes;9 and,

an employer’s former employees are unlikely to reunite at a local competitor’s workplace,

and, thus be unable to leverage their prior relationships—and the communication and

solidarity engendered thereby—to encourage each other to exercise their rights to

improve working conditions in their new workplace.

5 See Minteq International, Inc., 364 NLRB 721, 727 (2016), enforced, 855 F.3d 329 (D.C. Cir.

2017).

6 See McLaren Macomb, 372 NLRB No. 58, slip op. at 4, 7 (2023) (a severance agreement “is

unlawful if its terms have a reasonable tendency to interfere with, restrain, or coerce employees

in the exercise of their Section 7 rights” unless any relinquishment of those rights is “narrowly

tailored”); Guidance in Response to Inquiries About the McLaren Macomb Decision,

Memorandum GC 23-05 (Mar. 22, 2023). Although the general analysis in this memorandum is

based on the standard I proposed in Stericycle, I believe that under the McLaren Macomb

standard the same principles apply to non-compete provisions in severance agreements.

7 See McLaren Macomb, 372 NLRB No. 58, slip op

owly

tailored”); Guidance in Response to Inquiries About the McLaren Macomb Decision,

Memorandum GC 23-05 (Mar. 22, 2023). Although the general analysis in this memorandum is

based on the standard I proposed in Stericycle, I believe that under the McLaren Macomb

standard the same principles apply to non-compete provisions in severance agreements.

7 See McLaren Macomb, 372 NLRB No. 58, slip op. at 5-6 (“The ‘future rights of employees as

well as the rights of the public may not be traded away’ in a manner which requires ‘forbearance

from future . . . concerted activities.’” (quoting Mandel Security Bureau, 202 NLRB 117, 119

(1973))) (collecting cases).

8 See Minteq, 364 NLRB at 727 (unilaterally adopted work rule stating that employees, who were

covered by a collective-bargaining agreement that included protection from discipline and

discharge without “just cause,” were “employee[s]-at-will” had “a reasonable tendency to

discourage employees from engaging in” protected activity “for fear that they could be discharged

without the contractual ‘just cause’ protection”).

9 See id. at 723 n.11 (in determining that non-compete provisions are mandatory subjects of

bargaining, “recogniz[ing] the serious impact on employees of [a non-compete provision] if, for

example, employees . . . were locked out by the [employer] during a labor dispute,” because the

provision prohibits employees from replacing lost income by performing the type of work they had

been performing for the employer).

1 (in determining that non-compete provisions are mandatory subjects of

bargaining, “recogniz[ing] the serious impact on employees of [a non-compete provision] if, for

example, employees . . . were locked out by the [employer] during a labor dispute,” because the

provision prohibits employees from replacing lost income by performing the type of work they had

been performing for the employer).

3

In addition, non-compete provisions that could reasonably be construed by

employees to deny them the ability to quit or change jobs by cutting access to other

employment opportunities chill employees from engaging in five specific types of activity

protected under Section 7 of the Act.

First, they chill employees from concertedly threatening to resign to demand better

working conditions.10 Specifically, they discourage such threats because employees

would view the threats as futile given their lack of access to other employment

opportunities and because employees could reasonably fear retaliatory legal action for

threatening to breach their agreements, even though such legal action would likely violate

the Act.11

Second, they chill employees from carrying out concerted threats to resign or

otherwise concertedly resigning to secure improved working conditions. Although extant

Board law does not unequivocally recognize a Section 7 right of employees to concertedly

resign from employment,12 such a right follows logically from settled Board law, Section

7 principles, and the Act’s purposes.13 It is also consistent with the U.S. Constitution and

other federal laws.14 Accordingly, I will urge the Board to limit decisions inconsistent with

that right to their facts or overrule them.

10 See, e.g., Morgan Corp., 371 NLRB No. 142, slip op. at 3-4 (2022) (employee who complained

to supervisor about coworker’s raise and said that he and two other coworkers were threatening

to quit because of it was engaged in protected concerted advocacy for higher wages)

ws.14 Accordingly, I will urge the Board to limit decisions inconsistent with

that right to their facts or overrule them.

10 See, e.g., Morgan Corp., 371 NLRB No. 142, slip op. at 3-4 (2022) (employee who complained

to supervisor about coworker’s raise and said that he and two other coworkers were threatening

to quit because of it was engaged in protected concerted advocacy for higher wages).

11 See generally Ashford TRS Nickel, LLC, 366 NLRB No. 6, slip op. at 3-7 (2018) (lawsuit

targeting Section 7-protected consumer boycott violated Section 8(a)(1)).

12 See, e.g., Crescent Wharf & Warehouse Co., 104 NLRB 860, 861-62 (1953) (voluntary

resignation, by letter, of six employees dissatisfied with their employer’s refusal to increase their

wages was unprotected where there was “no basis for inferring that the letter was a device

selected by the . . . employees to enforce demands upon [the employer]”).

13 See, e.g., QIC Corp., 212 NLRB 63, 68 (1974) (employees’ seeking employment at competitor

of their employer was protected where “[t]he employees were bound by no contract to remain with

the [employer] and, as a result, were free at any time they wished to exercise economic self-help

and seek better paying jobs”).

14 See, e.g., Pollock v. Williams, 322 U.S. 4, 17-18 (1944) (explaining that the Thirteenth

Amendment was meant to maintain a system of “completely free and voluntary labor” and that

the “right to change employers” is the “defense against oppressive hours, pay, working

conditions, or treatment”). See generally Non-Compete Clause Rule, 88 Fed. Reg. 3482, 3504

(proposed Jan

etter paying jobs”).

14 See, e.g., Pollock v. Williams, 322 U.S. 4, 17-18 (1944) (explaining that the Thirteenth

Amendment was meant to maintain a system of “completely free and voluntary labor” and that

the “right to change employers” is the “defense against oppressive hours, pay, working

conditions, or treatment”). See generally Non-Compete Clause Rule, 88 Fed. Reg. 3482, 3504

(proposed Jan. 19, 2023) (“FTC Proposed Non-Compete Rule”) (non-compete clauses, which

burden the ability to quit by forcing workers to either remain in their current job or take an action

that would likely affect their livelihood, are exploitative and coercive at the time of the worker’s

potential departure from their job) and https://www.ftc.gov/news-events/news/press-

releases/2023/01/ftc-cracks-down-companies-impose-harmful-noncompete-restrictions-

thousands-workers; Antitrust Div. of the U.S. Dep’t of Just., Comment on FTC Proposed Non-

Compete Rule at 2-3 (Apr. 19, 2023), https://www.justice.gov/atr/page/file/1580551/download

4

Third, they chill employees from concertedly seeking or accepting employment

with a local competitor to obtain better working conditions.15 Such protected activity would

also include a lone employee’s acceptance of a job as a logical outgrowth of earlier

protected concerted activity.16

Fourth, they chill employees from soliciting their co-workers to go work for a local

competitor as part of a broader course of protected concerted activity.17 They do so

because employees cannot act on the solicitation without breaching the agreements and

because potential solicitors could reasonably fear retaliatory legal action for soliciting co-

workers to breach their agreements, even though such legal action would likely violate

the Act.18

Finally, they chill employees from seeking employment, at least in part, to

specifically engage in protected activity with other workers at an employer’s workplace.19

In this regard, they effectively limit employees from the kind of mobility required to be able

ory legal action for soliciting co-

workers to breach their agreements, even though such legal action would likely violate

the Act.18

Finally, they chill employees from seeking employment, at least in part, to

specifically engage in protected activity with other workers at an employer’s workplace.19

In this regard, they effectively limit employees from the kind of mobility required to be able

to engage in some particular forms of this activity, such as union organizing, which may

involve obtaining work with multiple employers in a specific trade and geographic region.

Thus, in my view, the proffer, maintenance, and enforcement of a non-compete

provision that reasonably tends to chill employees from engaging in Section 7 activity as

described above violate Section 8(a)(1) unless the provision is narrowly tailored to special

circumstances justifying the infringement on employee rights. In this regard, a desire to

avoid competition from a former employee is not a legitimate business interest that could

support a special circumstances defense.20 Additionally, in my opinion, business interests

(“Antitrust Div. Comment”) (explaining that since at least 1414, the law has looked with

skepticism on restraints on workers’ future employment).

15 See, e.g., Laurus Technical Institute, 360 NLRB 1155, 1164-66 (2014) (employee’s inquiry with

competitor about job opportunities on behalf of coworkers was protected concerted activity and

not unprotected “disloyalty”).

16 Cf. Liberty Mutual Insurance Co., 235 NLRB 1387, 1387-88 (1978) (where employer unlawfully

discharged employee in violation of Section 8(a)(3) and (1), employee thereafter formed

competing enterprise in apparent violation of non-compete agreement, and employer sued to

enforce the agreement, Board ordered the employer to reimburse employee’s legal defense

costs), enforcement denied on other grounds, 592 F.2d 595 (1st Cir. 1979).

17 See, e.g., M.J

88 (1978) (where employer unlawfully

discharged employee in violation of Section 8(a)(3) and (1), employee thereafter formed

competing enterprise in apparent violation of non-compete agreement, and employer sued to

enforce the agreement, Board ordered the employer to reimburse employee’s legal defense

costs), enforcement denied on other grounds, 592 F.2d 595 (1st Cir. 1979).

17 See, e.g., M.J. Mechanical Services, 325 NLRB 1098, 1098, 1106 (1998) (union organizers

were protected in telling their coworkers about the benefits of belonging to a union and referring

them to the union hall, even where it caused one employee to join the union, which then assigned

the employee to work for a union contractor), enforced mem., 194 F.3d 174 (D.C. Cir. 1999).

18 See generally Ashford TRS Nickel, 366 NLRB No. 6, slip op. at 3-7.

19 See, e.g., M. J. Mechanical Services, 324 NLRB 812, 812-14 (1997), enforced mem., 172 F.3d

920 (D.C. Cir. 1998).

20 See Restatement (Second) of Contracts § 188 cmt. b (1981) (post-employment restraint on

competition “must usually be justified on the ground that the employer has a legitimate interest in

5

in retaining employees or protecting special investments in training employees are

unlikely to ever justify an overbroad non-compete provision because U.S. law generally

protects employee mobility,21 and employers may protect training investments by less

restrictive means, for example, by offering a longevity bonus. I note that employers’

legitimate business interest in protecting proprietary or trade secret information can be

addressed by narrowly tailored workplace agreements that protect those interests.

It is unlikely an employer’s justification would be considered reasonable in common

situations where overbroad non-compete provisions are imposed on low-wage or middle-

wage workers who lack access to trade secrets or other protectible interests, or in states

where non-compete provisions are unenforceable

can be

addressed by narrowly tailored workplace agreements that protect those interests.

It is unlikely an employer’s justification would be considered reasonable in common

situations where overbroad non-compete provisions are imposed on low-wage or middle-

wage workers who lack access to trade secrets or other protectible interests, or in states

where non-compete provisions are unenforceable. For example, in a recent case I

authorized issuance of a complaint alleging unlawful maintenance of an overbroad non-

compete provision, to which the employer had subjected low-wage employees, where

there was no evidence of a legitimate business interest justifying the provision. The

provision prohibited the employees from, until two years after the end of their employment

with the employer, “enter[ing] the employment of any . . . business directly engaged” in

the business of the employer in the entire state.

Notwithstanding the above, not all non-compete agreements necessarily violate

the NLRA.22 Some non-compete agreements may not violate the Act because employees

could not reasonably construe the agreements to prohibit their acceptance of employment

relationships subject to the Act’s protection,23 for example, provisions that clearly restrict

only individuals’ managerial or ownership interests in a competing business, or true

restraining the employee from appropriating valuable trade information and customer

relationships to which he has had access in the course of his employment”); see also, e.g., Hasty

v. Rent-A-Driver, Inc., 671 S.W.2d 471, 473 (Tenn. 1984) (to enforce non-compete agreement,

employer must show “special facts present over and above ordinary competition” that would

otherwise give former employee “an unfair advantage in future competition with the employer”).

21 See supra note 14.

22 Non-compete agreements that do not violate the Act may violate other federal laws. See, e.g.,

U.S. v. Am. Tobacco Co., 221 U.S

d 471, 473 (Tenn. 1984) (to enforce non-compete agreement,

employer must show “special facts present over and above ordinary competition” that would

otherwise give former employee “an unfair advantage in future competition with the employer”).

21 See supra note 14.

22 Non-compete agreements that do not violate the Act may violate other federal laws. See, e.g.,

U.S. v. Am. Tobacco Co., 221 U.S. 106, 181-83 (1911) (tobacco companies’ collective

practices, including “constantly recurring” use of non-compete provisions, violated the Sherman

Act); FTC Proposed Non-Compete Rule, 88 Fed. Reg. at 3482 (proposing rule that would make

non-compete agreements an unlawful “unfair method of competition”) and

https://www.ftc.gov/news-events/news/press-releases/2023/01/ftc-cracks-down-companies-

impose-harmful-noncompete-restrictions-thousands-workers; Antitrust Div. Comment, supra

note 14, at 3 (citing challenges the Division has brought to anticompetitive employment

practices such as the use of non-compete clauses).

23 See Harrah’s Lake Tahoe Resort, 307 NLRB 182, 182 (1992) (employee’s advocacy for

proposal that employee stock option plan buy 50 percent of stock of employer’s parent corporation

was unprotected where proposal would not have advanced employees’ interests as employees

but rather their interests as “entrepreneurs, owners, and managers”).

6

independent-contractor relationships.24 Moreover, there may be circumstances in which

a narrowly tailored non-compete agreement’s infringement on employee rights is justified

by special circumstances.

In conclusion, Regions should submit to Advice cases involving non-compete

provisions that are arguably unlawful under the analysis summarized herein, as well as

arguably meritorious special circumstances defenses

or relationships.24 Moreover, there may be circumstances in which

a narrowly tailored non-compete agreement’s infringement on employee rights is justified

by special circumstances.

In conclusion, Regions should submit to Advice cases involving non-compete

provisions that are arguably unlawful under the analysis summarized herein, as well as

arguably meritorious special circumstances defenses. In appropriate circumstances,

Regions should seek make-whole relief for employees who, because of their employer’s

unlawful maintenance of an overbroad non-compete provision, can demonstrate that they

lost opportunities for other employment, even absent additional conduct by the employer

to enforce the provision. In this regard, Regions should seek evidence of the impact of

overbroad non-compete agreements on employees and, where applicable, present at trial

evidence of any adverse consequences, including specific employment opportunities

employees lost because of the agreements.25

Please direct any questions about this memorandum to Advice.

/s/

J.A.A.

24 A non-compete provision prohibiting independent-contractor relationships may, however,

violate Section 8(a)(1) in the context of industries where employees are commonly misclassified

as independent contractors. Regions should submit to the Division of Advice (“Advice”) any cases

where a non-compete agreement would chill Section 7 activity by effectively prohibiting

employment relationships even though nominally prohibiting only independent-contractor

relationships.

25 As you know, I am committed to an interagency approach to restrictions on the exercise of

employee rights, including limits to workers’ job mobility. Last year, the NLRB entered into

memoranda of understanding with the Federal Trade Commission and the Department of

Justice’s Antitrust Division, both of which have addressed the anticompetitive effects of non-

compete agreements

elationships.

25 As you know, I am committed to an interagency approach to restrictions on the exercise of

employee rights, including limits to workers’ job mobility. Last year, the NLRB entered into

memoranda of understanding with the Federal Trade Commission and the Department of

Justice’s Antitrust Division, both of which have addressed the anticompetitive effects of non-

compete agreements. Regions should alert the Division of Operations-Management about cases

involving non-compete agreements that could potentially violate laws enforced by the FTC and

the Antitrust Division for possible referral to those agencies.