NLRB: Non-competition agreements violate labor law

Officials with the National Labor Relations Commission said in a memo that forcing employees to sign non-compete agreements usually violates U.S. labor laws.

According to a memo sent to NLRB’s attorneys on Tuesday, NLRB general counsel Jennifer Abruzzo said the agreements tend to curb employee rights, although there are some exceptions.

A non-compete agreement is a contract between an employee and an employer that prohibits the employee from taking on certain jobs after termination of employment. Many of these agreements are in place to protect trade secrets between competing companies.

Abruzzo said these agreements generally violated the National Labor Relations Act, which protects employees’ rights to self-organization and collective bargaining.

Nonetheless, she says there are circumstances in which non-compete agreements are acceptable. But she says the agreement must be “strictly tailored to the particular circumstances that justify violations of employee rights.”

An example of a legal non-compete agreement is when the agreement limits an employee’s ownership rights in a competitor.

Non-compete contracts are particularly unpopular among Democratic lawmakers and labor rights groups. Currently, three states—California, North Dakota, and Oklahoma—have banned such agreements. In addition, some states have strict limits on non-compete agreements.