Employer Non-compete Clauses Are Likely Illegal, Per NLRB

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published June 18, 2023

Amidst a period of low unemployment rates and a recovering jobs market, there is a renewed focus on employee rights in the workplace. To help you understand what is going on and what we expect to happen in the future, our highly-experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest...

Non-compete clauses may violate federal labor law, except in limited cases, according to a recent memo by Jennifer Abruzzo, general counsel of the National Labor Relations Board. Such pacts are likely illegal if workers could view them as hindering their ability to quit and/or switch jobs, and thus their ability to organize with others and collectively bargain. The memo sets the stage for a possible NLRB ruling on the issue, with Abruzzo directing regional Labor Department officials to submit any cases that involve arguably illegal noncompete agreements to the general counsel’s office. It also strengthens the Biden administration’s regulatory overlap between the NLRB and Federal Trade Commission (FTC), which proposed a rule in January 2023 to ban non-compete clauses. The two agencies are collaborating in their efforts.

Roughly one in five Americans is bound by a non-compete agreement. But they are more prevalent in certain industries, most notably, the tech sector, where 35%-45% of workers are subject to the restrictions of non-compete clauses, possibly preventing workers from taking certain jobs after leaving a current employer.

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This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

Housiaux covers the White House and state and local government for The Kiplinger Letter. Before joining Kiplinger in June 2016, he lived in Sioux Falls, SD, where he was the forum editor of Augustana University's student newspaper, the Mirror. He also contributed stories to the Borgen Project, a Seattle-based nonprofit focused on raising awareness of global poverty. He earned a B.A. in history and journalism from Augustana University.