Who (Actually) is the Boss (Take Two)? The NLRB Takes on Non-Competes

A few months ago, we wrote about the NLRB General Counsel's opinion that some non-disparagement and confidentiality provisions in employment agreements potentially interfered with employees' NLRA Section 7 rights. That opinion was a bit of a show-stopper because employers routinely seek -- in exchange for severance and other termination perks -- the highly prized benefit of avoiding being put on blast in the face of termination drama.  We noted then the non-binding advisory nature of that opinion, but suggested it would be a miss to disregard even the advisory views of a Federal agency with hefty regulatory powers. 

Yet again, the NLRB General Counsel has flexed NLRB's agency muscles, this time with a similar advisory opinion regarding non-compete agreements. Like the prior conclusions that non-disparagement provisions might interfere with employees' NLRA Section 7 rights, the recent memo concludes that non-compete agreements potentially interfere with Section 7 rights. 

The opinion asserts that, because an employee might reasonably construe a non-compete agreement to deny the employee the ability to quit or change jobs, employees might believe a non-compete contractually cuts off access their to other employment opportunities. In light of that belief, the opinion concludes, employees might be less willing to exercise their right to question wages and working conditions in their existing positions. 

Setting aside whether this conclusion is legally accurate, this opinion merits two take-aways for employers. First, Section 7 rights are limited to non-supervisory employees (see our prior post for a discussion about that topic), so even accepting the accuracy of the opinion and empowering it, by its terms it only applies to non-managers. But the second point, which follows from the first, is of equal importance. Asking rank and file non-managerial employees to sign non-competes, without good reason, is not good business. If the purpose of a non-compete is to protect critical intellectual property, secure important customer and business relationships, and retain the value of highly skilled employees who are well compensated to enter into restrictive covenants, then it there would seem to be little purpose in asking lower-level employees to sign these covenants in the first instance. 

So while "take-two" of the NLRB's foray into previously well-accepted employment conditions may be a regulatory flex, the underlying point is a good one: employers should always consider the goal of non-competes before asking any employee to sign one, the covenant should be tailored to its purpose, and not all employees are alike. Sometimes understanding who is the boss really does matter.