On October 7, 2024, the National Labor Relations Board (NLRB) General Counsel issued a memorandum stating that it intends to pursue remedies for employers who purportedly violate the National Labor Relations Act (NLRA) through the use of non-compete and training cost reimbursement agreements.
The General Counsel’s Memorandum is predicated on the assertion that non-compete agreements and training repayment agreements are presumptively unlawful restraints of trade and justifiable only in limited circumstances. Given the failure of the Federal Trade Commission’s prior effort to impose a nationwide ban on restrictive covenants and the historical role of state courts and legislatures with respect to such contracts, the ultimate merits of the General Counsel’s position are far from clear.
There is no question, however, that such arrangements will likely be the subject of increased challenge and enforcement actions before the NLRB. In this regard, the recent Memorandum recommends that the available remedies to those subject to non-compete agreements go beyond simply rescinding the agreement. In addition to urging the NLRB to find most restrictive covenant agreements unlawful, the General Counsel advises broad remedial measures, including:
- Compensating employees for the financial difference between the payment from the job governed by the non-compete and other jobs that they might have otherwise taken;
- Repayment of lost wages for former employees who found themselves out of work due to a non-compete;
- Compensation for moving-related costs for employees who had to move beyond the jurisdiction of a non-compete and
- Compensation for retraining costs required to find a new job is not subject to the non-compete.
It is evident that the NLRB will also seek remedies for “stay-or-pay” provisions, which are agreements where the employee receives a payment that must then be repaid should the employee not stay with the company for a specified amount of time. “Stay-or-pay” agreements include quit fees, sign-on bonuses, relocation stipends, and training and educational repayment contracts. The specific situations in which these remedies might apply are detailed in the Memorandum, which effectively calls for a case-by-case analysis to determine whether the agreement is justified in the eyes of the NLRB.
The General Counsel has provided a 60-day period to “cure” existing stay-or-pay provisions – but not those entered into after October 7.
So, what does this mean for employers? We recommend identifying employees who are or have been subject to non-competes, reviewing stay-or-pay arrangements, and planning for compliance and/or potential legal challenges in light of the new Memorandum.
Are you an employee or employer with questions about a non-compete agreement or a stay-or-pay provision? Contact Warner PLLC to discuss your unique situation and develop a plan for compliance going forward.
