Your Employment Lawyer Can Help You Strategize In A Changing Climate

This week, the General Counsel of the National Labor Relations Board (NLRB), the lead NLRB attorney responsible for the prosecution of unfair labor practice cases, announced that most non-compete agreements likely violate the National Labor Relations Act, absent limited “special circumstances.”  Here’s a quick review of non-competes and what your employment lawyer can do to help your business in this changing climate.

What Are Non-Compete Agreements?

Non-compete agreements typically prohibit employees from competing against their former employer in a designated geographic area for a specific period.  Employers have long relied on non-competes to serve a variety of legitimate purposes, including to protect trade secrets or confidential information, goodwill and customer relationships, specialized training and an employee’s unique skills or knowledge.

How Are Non-Compete Agreements Enforced?

Most states disfavor non-compete agreements because they view such agreements as unduly burdensome for workers. As a result, courts typically won’t enforce such agreements unless the employer can show that it seeks to protect a legitimate business interest, and that the restrictions imposed by the non-compete are reasonable in scope and duration. However, employers typically aren’t penalized for attempting to enforce an un-enforceable non-compete.  This has incentivized many employers to blanket their workforce with non-compete agreements, covering both workers holding jobs that warrant non-compete restrictions, and workers holding jobs that do not.

How Do Non-Compete Agreements Affect Employees?

Since the mere existence of a non-compete (even an unenforceable one) can significantly restrict an employee’s job mobility, public support for banning non-compete is growing.  However, few states have passed laws imposing such bans and no ban exists at the federal level (at least not yet).

Is The NLRB’s Announcement A Law?

The NLRB General Counsel’s announcement isn’t binding law; her legal position on the unlawfulness of most non-competes would only become law if the NLRB itself issued a decision or an administrative rule that agreed with her position. But her announcement represents guidance to the NLRB’s field offices directing them on the types of workplace practices that they should consider prosecuting as unfair labor practices.  In other words, the General Counsel is encouraging NLRB staff to begin issuing unfair labor practice charges (also known as called “ULP Charges”) against employers who use non-compete agreements and to seek relief for affected workers, such as for those who are denied a job with a competitor.

How Can Working With An Employment Lawyer Help My Business?

Private employers should work with their employment lawyers to consider the risks this poses to their continued use of non-competes, and take steps tailored to their business needs to mitigate those risks.

“At our firm, we regularly assist businesses in crafting and utilizing non-competes and other tools to protect their businesses,” says Gary Savine, principal of Savine Employment Law, Ltd. “Time is of the essence for employers to review whether their non-competes are susceptible to legal challenge, and to make necessary adjustments to the agreements or to the range of employees subject to the agreements, so that they can continue to protect their businesses from unfair competition without exposing themselves to excessive risk of violating the National Labor Relations Act.”

Although the NLRB’s position does not spell the end of non-competes, it does mean employers have a new set of risks to manage. Call us today, 312-788-2668, for a non-compete strategy session.

Source:  NLRB

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