This has been a year of good news for employees when it comes to limiting or eliminating the professional and financial challenges that non-compete clauses can impose when considering a job change.
Earlier in the year, I wrote about an exciting development whereby the U.S. Federal Trade Commission proposed regulations that, if finalized and survive the predicted legal challenges, would ban nearly all non-competes across the country. On the heels of that, the U.S. National Labor Relations Board's General Counsel, Jennifer A. Abruzzo, signaled that she believed non-compete clauses may interfere with employees' rights under the federal National Labor Relations Act (NLRA), which I posted about here.
Just days ago, Ms. Abruzzo issued a legal memorandum following through on her prior indication that non-compete clauses would be on shaky legal ground. In her May 30, 2023 memo, Ms. Abruzzo opined that "[e]xcept in limited circumstances, I believe the proffer, maintenance, and enforcement of [non-compete] agreements violate Section 8(a)(1) of the [NLRA]." While the memo does not carry the force of law (i.e., it is not binding on a court), it is an important step forward in rolling back non-competition restrictions that impose unnecessary harm on many workers across the country. At the very least, it will inform how regional offices within the agency will handle complaints about non-competes, which may lead to a Board decision that does have more legal weight. It could also serve as a tool for employees to now push back on non-competes that are adversely affecting them.
As I discussed in a previous post, because the NLRA applies to even non-union employees, the General Counsel's opinion memo applies to a great many U.S. workers: essentially, all private-sector employees who are not independent contractors, agricultural workers, or supervisors. The legal question of whether one qualifies as a "supervisor" is not always an intuitive or easy question to answer and must be analyzed on a case-by-case basis. There is also a caveat in the memo that non-competes would likely be permissible under the NLRA if they restrict only an individual's managerial role or ownership interest in a competing business, or if the provisions are narrowly tailored and "special circumstances" apply. Suffice to say, though, that the scope of workers affected by this memo is expansive.
On a related note here in Maryland, the General Assembly passed and Governor Wes Moore signed a bill (SB 591, now Chapter 266) that amended the Maryland Noncompete and Conflict of Interest Clauses Act to expand the scope of workers who cannot be subjected to a non-compete agreement. Whereas the law previously outlawed non-competes for workers who earn an amount equal to or less than $31,200 annually or $15.00 per hour, the law now bans non-competes for workers who earn up to 150% of the state minimum wage. Because of another legislative change this past session, the minimum wage in Maryland will be $15.00 per hour starting on January 1, 2024. So, from 2024 onward, Maryland workers making $22.50 per hour ($46,800 annually) will be covered by the ban on non-competes.
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