Acting NLRB General Counsel Rescinds Agency Memos on Noncompetes

On Friday, Feb. 14, William Cowen, the acting general counsel for the National Labor Relations Board (NLRB), issued a memorandum that announced the rescission of 35 memos generated by former general counsel Jennifer Abruzzo, who was fired by President Donald Trump on Jan. 27.

Most notable in that list were two that have been the focus of recent Workspan Daily articles:

GC 23-08 Non-Compete Agreements that Violate the National Labor Relations Act
GC 25-01 Remedying the Harmful Effects of Non-Compete and “Stay-or-Pay” Provisions that Violate the National Labor Relations Act

The Cowen memo referenced the rescissions as a byproduct of tight resources, stating, “Over the past few years, our dedicated and talented staff have worked diligently to process an ever-increasing workload. Notwithstanding these efforts, we have seen our backlog of cases grow to the point where it is no longer sustainable. The unfortunate truth is that if we attempt to accomplish everything, we risk accomplishing nothing.”

Reading between the lines, though, the rescission of the Abruzzo memos on noncompete agreements likely demonstrates a bit of cross-agency support against federal rules that encumber such employment provisions. While the Federal Trade Commission (FTC) issued a final rule banning most noncompetes in April 2024:

A federal judge appointed during President Trump’s first term barred its nationwide implementation on Aug. 20 in Ryan LLC v. Federal Trade Commission; and,
The odds of the FTC pulling back its appeal of that decision grew significantly following Trump’s recast of the commission on Jan. 20 (Republican Andrew Ferguson was named chair and Mark Meador was positioned as the successor to Democratic commissioner Lina Khan, setting up a 3-2 Republican majority on the five-member committee).

The next domino to fall may indeed be the FTC dropping that appeal in the Ryan case.

The Noncompete Memos

Abruzzo’s GC 23-08 memo on noncompetes was issued on May 30, 2023, and sent to the NLRB’s regional directors, officers-in-change and resident officers. In it, she outlined her legal opinion that noncompete agreements “interfere with employees’ exercise of rights under Section 7 of the National Labor Relations Act. Except in limited circumstances, I believe the proffer, maintenance and enforcement of such agreements violate Section 8(a)(1) of the Act.”

Abruzzo stated in that memo noncompetes work to chill employees from engaging in five activities that are protected under Section 7. Specifically, they chill employees from:

“Concertedly threatening to resign to demand better working conditions.”
“Carrying out concerted threats to resign or otherwise concertedly resigning to secure improved working conditions.”
“Concertedly seeking or accepting employment with a local competitor to obtain better working conditions.”
“Soliciting their coworkers to go work for a local competitor as part of a broader course of protected concerted activity.”
“Seeking employment, at least in part, to specifically engage in protected activity with other workers at an employer’s workplace.”

Abruzzo’s GC 25-01 memo was issued on Oct. 7, 2024, and sent to the same recipient list as the GC 23-08 memo. In it, she takes the position that “except in limited circumstances, the proffer, maintenance or enforcement of noncompete provisions violates the National Labor Relations Act.”

Part I of this memo provides additional information about her intent to urge the board not only to find certain noncompete provisions unlawful but also, as fully as possible, to remedy the harmful effects on employees when employers use and apply them. In addition, she stated “certain ‘stay-or-pay’ provisions, under which an employee must pay their employer if they separate from employment, infringe on employees’ Section 7 rights in many of the same ways that noncompete agreements do and that such provisions, therefore, also violate Section 8(a)(1) of the Act unless narrowly tailored to minimize that infringement.”

Part II of this memo sets forth Abruzzo’s proposed framework for assessing the lawfulness of such provisions, the remedies she intends to seek before the board and the circumstances under which she would decline to issue a complaint against preexisting stay-or-pay arrangements.

The memo stated that, in her view, a “narrowly tailored” stay-or-pay provision must:

Be fully voluntary;
Confer a benefit to the employee (unrelated to mandatory training) in exchange for their formal agreement;
Have a reasonable and specific repayment amount that is specified in advance;
Seek no more than the employer’s cost for the provided benefit;
Have a reasonable “stay” period; the length of this period can vary based on several factors (e.g., the benefit provided to the employee, the benefit’s cost, whether the repayment amount decreases over a defined time, the employee’s income); and
Not require repayment if the employer terminates the employee without cause.

To be deemed lawful, such provisions must also advance “a legitimate business interest,” according to Abruzzo.

Workspan Daily covered the “stay-or-pay” angle to noncompetes in two recent articles:

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