Do Non-Compete Agreements violate Federal law?

On May 30, 2023, the General Counsel of the National Labor Relations Board issued a memo to all NLRB Directors and Officers, advising them of the NLRB's view that non-compete provisions in employment contracts and severance agreements violate the National Labor Relations Act, with a few limited exceptions. The memo explains that broad non-compete agreements violate Section 7 of the National Labor Relations Act by interfering with employee's ability to resign to secure better working conditions, to solicit their co-workers to join them, and to accept employment in their field of expertise with a competitor who might offer better working conditions.

According to the General Counsel: “Non-compete provisions reasonably tend to chill employees in the exercise of Section 7 rights when the provisions could reasonably be construed by employees to deny them the ability to quit or change jobs by cutting off their access to other employment opportunities that they are qualified for based on their experience, aptitudes, and preferences as to type and location of work."

The General Counsel wrote that there may be narrow exceptions, including when noncompete agreements narrowly restrict the employee from managerial or ownership interests in a competing business.

For more information contact Law Office of Laura Wong-Pan PLLC at 845-218-1288 or info@laurawongpanlaw.com.

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Confidentiality and non-disparagement clauses in severance agreements are deemed unlawful.

In a major decision reversing at least two prior decisions, the National Labor Relations Board (NLRB) has determined that non-disparagement and confidentiality clauses in the separation agreement that an employer gave to its employees when they were laid off, violates Federal law. See McLaren Macomb and Local 40 RN Staff Council, OPEIU, Case No. 07-CA-263041 (NLRB, Feb. 21, 2023).

When entering into separation or settlement agreements, employers routinely require confidentiality or non-disclosure agreements, which restrict employees’ ability to disclose the terms of the agreement and sometimes restrict them from disclosing any facts leading up to their separation from employment, to anyone but their lawyers and accountants. Similarly, employers also often insist on non-disparagement language, which prohibit the former employees from saying anything negative about the company, or communicating their workplace grievances to others, and subjecting them to hefty penalties should they violate those clauses, which are typically effective for their rest of their lives. This decision calls into question the validity of that practice which, virtually always, provides more significant benefits to the employers than the employees.

The risk of a former employer having to pay a corporate employer’s legal bill for violating these clauses is a particularly harsh remedy that, if enforced, could well bankrupt a typical worker.

The Federal law in question, the National Labor Relations Act (NLRA) protects the rights of employees not only to form and join unions, but also to engage in “protected concerted activities,” which includes collaborating with others to improve terms and conditions of employment. These rights are called “Section 7 rights,” falling under Section 7 of the NLRA, and extend to nonsupervisory employees in non-unionized and unionized workplaces.

In the McLaren Macomb case, the NLRB concluded that employees have the right to use administrative, judicial, legislative, and political channels, or to publicize their issues in the media, or on the internet when there is an ongoing labor dispute, and that the non-disparagement and confidentiality clauses interfered with those rights.

The NLRB wrote that “inherent in any severance agreement requiring workers not to engage in protected concerted activity is the coercive potential of the overly broad surrender of NLRA rights if they wish to receive the benefits of the agreement. (p. 7)

An appeal will most likely be filed, and many interest groups will undoubtedly seek to intervene to submit “friend of the court,” or amicus curiae briefs. In the meantime, the employment law landscape will be altered. If employers continue to insist on nondisparagement and confidentiality clauses in their separation agreements with non-supervisory employees, they risk violating the NLRA and invalidating the entire agreement, yet it is often these clauses, in conjunction with the general release of rights to sue, which drives a settlement.

At this point, it would be wise for employers to immediately cease from including confidentiality and non-disparagement clauses in their separation or severance agreements.

Click -HERE to access the NLRB decision.

Court voids the Ulster County legislative district map.

Several residents of Ulster County brought a lawsuit against the Ulster County Commission on Reapportionment, to challenge the maps that were adopted on July 13, 2022, to redraw the 23 Ulster County legislative districts.

These districts are usually redrawn every ten years, after the release of the census figures, to respond to changes in populations throughout the county. The Commission is required to consider the "cores of existing districts, of pre-existing political subdivisions,

including cities, villages of towns, and of communities of interest," according to New York State Municipal Home Rule Law, which was recently amended in October 2021.

The changes to State law also required that populations of each county legislative district be as equal as possible, and with a difference in populations of the largest and smallest districts no more than 5% of the mean of each of the legislative districts.

On December 13, 2022, following oral argument, Ulster County Supreme Court Justice Kevin Bryant determined that the maps did not follow New York State Home Rule Law and that they are void. The Commission was ordered to meet and redraw the lines for the legislative districts to conform with State law, to hold a public hearing on December 27, 2022 and to adopt a new map by January 3, 2023. If this is not accomplished, the Court will appoint a Special Master.

Laura Wong-Pan, Esq. and Lanny Walter, Esq. represent the Petitioners.