As recently foreshadowed, the National Labor Relations Board (“NLRB” or “Board”) now appears poised to weigh in on whether noncompete agreements, even those that may be legal under state law, violate the National Labor Relations Act (“Act”).

Background: NLRB GC Targets Noncompetes

On May 31, 2023, Board General Counsel Jennifer Abruzzo issued a memorandum stating that she would seek to invalidate nearly all post-employment noncompete agreements – even those that are indisputably valid under applicable state law.  Her rationale is that any such agreement that limits future employment interferes with Section 7 rights under the Act. The memo was striking both for its ambition and its nearly-unprecedented scope.

If the Board were to agree with General Counsel Abruzzo’s theory, and the broad authority that she sought to assert, then nearly all noncompetes signed by employees under the Act’s definition (excluding managers and supervisors, but covering both union and non-union employees) could lead to an unfair labor practice charge.  The outcome of such a charge could be the invalidation of those agreements, and potential damages resulting from the implementation of such noncompetes.

New Complaint Applying Abruzzo’s Legal Theory in Action

On September 1, 2023, the Regional Director of NLRB Region 9 (Cincinnati) followed the General Counsel’s explicit direction and filed a consolidated complaint against “Juvly Aesthetics,” an operator of spas and medical clinics that provides non-surgical aesthetic services in Ohio and Wisconsin.

In the complaint, the Regional Director accuses the company of violating Section 8(a)(1) of the Act for interfering with employees’ Section 7 rights, by seeking to enforce its “Non-Compete and Confidentiality Agreement.”

The noncompete provision prevented former employees from practicing “aesthetic medicine” for two years, within 20 miles of any location of the company, after the termination of their employment regardless of the reason.  The company also threatened former employees to repay their training costs if they ever violate the noncompete provision. The company also required new employees to agree to non-solicit and no-hire provisions that lasted for two years after the end of their employment, which covered any current employee of the company. Finally, the company included a provision that fined former employees $150,000 for any time they solicited a current employee of the company.

In line with the Board’s prior ruling in McLaren Macomb, 372 NLRB No. 58 (2023), the complaint also alleges that the company committed several unfair labor practices because it allegedly instructed its employees that they could not discuss their individual employment contracts and handbooks with other employees, and fired employees for violating a non-disparagement clause included in the company’s handbook.

The consolidated complaint also states that the NLRB seeks to “rescind the unlawful provisions in Respondent’s Offers of Employment, Employee Handbook, Non-Compete and Confidentiality Agreement, and Exit Agreement” and seeks compensatory damages for the former employees. The company submitted its answer to the consolidated case on September 15, 2023, which is not yet publicly available, and a hearing before an administrative law judge is scheduled to take place on November 28, 2023.

This case is apparently the first public case applying Abruzzo’s bold legal theory to a ripe dispute.  Interestingly, the case appears to involve non-union employees, demonstrating that this issue has the potential to affect all employees as defined by the Act, not just unionized employees.  The ALJ’s analysis of this issue bears close watching, and any review by the Board could take place in the next couple of years.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Joshua Fox Joshua Fox

Joshua S. Fox is a senior counsel in the Labor & Employment Law Department and a member of the Sports, Labor-Management Relations, Class and Collective Actions and Wage and Hour Groups.

As a member of the Sports Law Group, Josh has represented several…

Joshua S. Fox is a senior counsel in the Labor & Employment Law Department and a member of the Sports, Labor-Management Relations, Class and Collective Actions and Wage and Hour Groups.

As a member of the Sports Law Group, Josh has represented several Major League Baseball Clubs in all aspects of the salary arbitration process, including the Miami Marlins, Boston Red Sox, Los Angeles Dodgers, Kansas City Royals, San Francisco Giants, Tampa Bay Rays and Toronto Blue Jays. In particular, Josh successfully represented the Miami Marlins in their case against All-Star Catcher J.T. Realmuto, which was a significant club victory in salary arbitration. Josh also represents Major League Baseball and its clubs in ongoing litigation brought by current and former minor league players who allege minimum wage and overtime violations. Josh participated on the team that successfully defended Major League Baseball in a wage-and-hour lawsuit brought by a former volunteer for the 2013 All-Star FanFest, who alleged minimum wage violations under federal and state law. The lawsuit was dismissed by the federal district court, and was affirmed by the U.S. Court of Appeals for the Second Circuit.

Josh also has extensive experience representing professional sports leagues and teams in grievance arbitration proceedings, including playing a vital role in all aspects of the grievance challenging the suspension for use of performance-enhancing drugs of then-New York Yankees third baseman Alex Rodriguez. Josh also has counseled NHL Clubs and served on the trial teams for grievances alleging violations of the collective bargaining agreement, including cases involving use of performance-enhancing substances, domestic violence issues, and supplementary discipline for on-ice conduct. He has played a key role in representing professional sports leagues in all aspects of their collective bargaining negotiations with players and officials, including the Major League Baseball, National Hockey League, the National Football League, Major League Soccer, the Professional Referee Organization, and the National Basketball Association,.

In addition, Josh has extensive experience representing clients in the performing arts industry, including the New York City Ballet, New York City Opera, Big Apple Circus, among many others, in collective bargaining negotiations with performers and musicians, the administration of their collective bargaining agreements, and in grievance arbitrations.

Josh also represents a diverse range of clients, including real estate developers and contractors, pipe line contractors, hospitals, hotels, manufacturers and public employers, in collective bargaining, counseling on general employment matters and proceedings before the National Labor Relations Board, New York State Public Employment Relations Board and arbitrators.

Josh has also recently served as an adjunct professor at Cornell University’s School of Industrial Labor Relations for the past two years, teaching a course regarding Major League Baseball salary arbitration.

Prior to joining Proskauer, Josh worked for a year and a half at the National Hockey League, where he was involved in all labor and employment matters, including preparations for collective bargaining, grievance arbitration, contract drafting and reviewing and employment counseling. Josh also interned in the labor relations department of Major League Baseball and at Region 2 of the National Labor Relations Board. He was a member of the Brooklyn Law Review and the Appellate Moot Court Honor Society and served as president of the Brooklyn Entertainment and Sports Law Society.

Photo of David Gobel David Gobel

David R Gobel is an associate in the Labor Department and a member of the Employment Litigation & Counseling Group.

David Gobel earned his J.D at USC Gould School of Law, where he was a Senior Citations Editor of the USC Journal of

David R Gobel is an associate in the Labor Department and a member of the Employment Litigation & Counseling Group.

David Gobel earned his J.D at USC Gould School of Law, where he was a Senior Citations Editor of the USC Journal of Interdisciplinary Law, and part of the executive committee of USC’s Music Law Society. Prior to law school, David worked as a research executive for a marketing research firm in New York.