NLRB continues scrutiny of ‘stay-or-pay’ provisions, noncompete agreements

In May 2023, National Labor Relations Board (NLRB) General Counsel (GC) Jennifer Abruzzo issued a memo outlining her position that noncompete agreements in employment contracts potentially violate workers’ rights under the National Labor Relations Act (NLRA). She was critical of noncompete agreements because they restrict employees’ mobility, deter union organizing, and suppress wages. On October 7, 2024, GC Abruzzo released a memo outlining two new concepts relative to how the Board interprets the Act’s effects on employees’ rights under noncompete agreements.

Make-whole remedies

First, the 2024 memo proposes specific new remedies for noncompete agreements that violate the NLRA. Traditionally, the remedy awarded to an employee who challenges a noncompete in court is simply a determination from the court that the noncompete is unenforceable. Under the terms of the 2024 memo, GC Abruzzo is advocating that the remedies available to employees under the NLRA would require the employer to make the employee whole for any damages incurred as a result of the unlawful noncompete agreement.