NLRB GC to Seek Broad Remedies for Non-Compete and Stay-or-Pay Provisions
National Labor Relations Board (NLRB) General Counsel Jennifer Abruzzo issued an important policy memorandum this week. In GC Memorandum 25-01, Abruzzo asserts that most “stay-or-pay” provisions, where workers agree to repay their employer for certain benefits if the employee prematurely leaves employment, should be found unlawful unless narrowly tailored. The memo also sets forth broad remedies Ms. Abruzzo intends to seek if such provisions are held unlawful.
In addition, following up on her memo that most non-compete agreements are unlawful, Abruzzo laid out the remedies she will seek from the Board where it holds that an employer has unlawfully enforced or applied a non-compete agreement.
Before we proceed, employers should keep in mind the following caveats. This memorandum does not carry with it the force of law or otherwise change Board law. Rather, it merely sets forth the GC’s legal position. But, employers can expect the GC to advance her legal position against employers who proffer and maintain non-compete and stay-or-pay provisions that the Board may ultimately find unlawful. Additionally, there is a rather significant election next month, the result of which will dictate whether Abruzzo will have sufficient time to effectuate her legal position – if Donald Trump is elected, Abruzzo will almost certainly be terminated, absent resignation, upon his inauguration. Last, the positions set forth in this memo are not applicable to supervisors, whether or not they are subject to non-compete and/or stay-or-pay provisions.
Remedies for Unlawful Non-Compete Agreements
Abruzzo contends that non-compete provisions are often “self-enforcing,” causing employees to forego better opportunities or leverage outside options to obtain better working conditions in their current job due to fear of violating the non-compete. Additionally, the GC believes that non-compete provisions create additional financial harms to employees during the post-employment period that warrant make-whole relief.
Abruzzo asserted that she will seek the below remedies irrespective of whether the employee remains employed with the employer, was subject to an action taken to enforce the non-compete, resigned from employment, or was terminated for cause. Put simply, if an employee was subject to a non-compete found unlawful by the Board, Abruzzo will seek the following remedies:
- Loss of Prospective Higher Wages
- Lost Salary as a Result of Extended Time Out of Work
- Compensation for Lower-Paying Job in Different Field
- Moving Costs
- Retraining Costs
- Costs for Enforcement Actions
- The Provision was Voluntarily Entered Into in Exchange for a Benefit
- Reasonable and Specific Payment Amount
- The Stay Period Must Be Reasonable
- No Repayment Requirement if Employee is Terminated Without Cause