NLRB’s Evolving Stance on Restrictive Covenants in the Workplace: A Legal Analysis

Introduction:

Restrictive covenants, such as non-compete agreements and non-solicitation clauses, have long been utilized by employers to protect their legitimate business interests. These agreements often restrict employees’ ability to engage in certain activities after leaving their current job. However, the National Labor Relations Board (NLRB), the federal agency responsible for enforcing labor laws and protecting employees’ rights to engage in concerted activities, has increasingly scrutinized the use of restrictive covenants in the workplace. This article explores the NLRB’s evolving stance on restrictive covenants and the impact it has on both employers and employees.

The NLRB’s Historical Position:

Traditionally, the NLRB has taken a skeptical view of restrictive covenants, considering them potentially inhibiting to employees’ rights to engage in protected activities under the National Labor Relations Act (NLRA). The NLRA grants employees the right to engage in concerted activities for their mutual aid and protection. Thus, the NLRB has been particularly concerned with restrictive covenants that limit employees’ ability to seek employment with competitors or communicate with former colleagues regarding employment matters.

Shift in NLRB’s Approach:

In recent years, the NLRB’s approach to restrictive covenants has undergone significant changes. The NLRB’s current approach is marked by a more nuanced analysis of restrictive covenants. It focuses on the specific language, scope, and impact of these agreements, rather than categorically condemning them. Under the NLRB’s new framework, restrictive covenants will be evaluated on a case-by-case basis to determine whether they unduly restrict employees’ rights under the NLRA.

Factors Considered by the NLRB:

When reviewing restrictive covenants, the NLRB considers various factors to assess their impact on employees’ rights to engage in concerted activities. Some of the key factors include:

1. Duration and Geographic Scope: The NLRB examines the reasonableness of the time and geographical restrictions imposed by the agreement. Overly broad or excessively lengthy restrictions may be viewed as unduly inhibiting employees’ rights.
2. Impact on Protected Activities: The NLRB assesses whether the restrictive covenant significantly interferes with employees’ ability to engage in protected activities, such as discussing wages, work conditions, or unionization efforts.
3. Legitimate Business Interests: The NLRB acknowledges employers’ legitimate interests in protecting trade secrets, confidential information, and customer relationships. Restrictive covenants that are narrowly tailored to protect these interests are more likely to be deemed lawful.
4. Notice and Bargaining: The NLRB also considers whether employees were given adequate notice of the restrictive covenant and whether they had the opportunity to bargain or negotiate its terms.

Implications for Employers and Employees:

The NLRB’s evolving stance on restrictive covenants has significant implications for both employers and employees. Employers must carefully draft and review such agreements to ensure compliance with the NLRA. They should consider tailoring restrictive covenants to protect specific, legitimate business interests.  If the NLRB determines that the scope is overly broad, it may find the entire agreement void and not narrowly tailor it.  In these circumstances, the NLRB may also award the employee attorney’s fees incurred in challenging the restrictive covenants.