The National Labor Relations Board’s general counsel has issued a significant memo that signals a major shift in how the agency views noncompete provisions in employment agreements. The memo concludes that noncompete clauses do not, as a general matter, violate employees’ rights under federal labor law—a position that reverses years of aggressive enforcement under the previous administration.
This guidance represents a substantial victory for employers who have complained that the NLRB was interpreting noncompetes as unlawful restraints on workers’ ability to engage in protected union activities. The memo provides employers greater legal certainty in enforcing these provisions and reduces the likelihood of costly NLRB litigation. However, employers must remember that state law restrictions on noncompetes—particularly stringent in states like California—remain entirely unaffected and continue to impose significant limitations.
The NLRB’s Previous Stance and Change in Direction
Under Biden-era NLRB leadership, the general counsel’s office had taken an aggressive position that overly broad noncompete provisions could interfere with Section 7 rights—the rights of employees to engage in union organizing, strikes, and other concerted activity. The theory held that sufficiently expansive restrictions could chill workers’ willingness to engage in union activity.
Employers pushed back, arguing that noncompetes are ordinary contractual provisions designed to protect legitimate business interests like trade secrets and customer relationships. The new memo reflects this employer perspective, concluding that the NLRB should take a narrower view of when noncompetes implicate federal labor law.
The memo does not eliminate all NLRB oversight—if an employer uses a noncompete specifically as a threat or penalty for union activity, that would still violate the NLRA. However, the memo shifts the burden significantly.
Implications for Employers
Steps employers should consider:
- Review existing noncompete agreements for reasonable scope and duration
- Document legitimate business purposes for noncompete provisions
- Apply noncompetes consistently across similar employees
- Ensure noncompetes aren’t used as pretext to punish union organizing
- Train management that noncompetes cannot target protected activity
- Update employment handbooks to reflect current law
For New Jersey employers, this federal guidance is important but secondary to New Jersey state law, which imposes significant additional restrictions on noncompetes.
Looking Forward
Key takeaways:
The memo will likely reduce NLRB litigation over reasonably tailored noncompetes. However, unions and worker advocates may challenge the memo’s reasoning. State-level noncompete reforms are ongoing. Employers must navigate this complex patchwork of federal and state law carefully.
For further details, please contact the lawyers at Tobia & Lovelace Esq., LLC at 201-638-0990.