NLRB Files Complaint Against Ridiculously Overbroad Non-Compete As An Unfair Labor Practice
from the non-competes-are-human-drm dept
We’ve been on this soapbox for over 15 years now. There are reams upon reams of evidence that the single greatest reason why California became the innovation hub that it became (in both Silicon Valley and Hollywood) was because it effectively outlawed non-compete agreements in the late 19th century. I have long been a vocal advocate for outlawing all non-compete agreements. The benefit is clear and the data is unquestionable. Non-competes are not just a tax on labor, it’s a huge and damaging tax on innovation.
I was cautiously happy earlier this year that the Biden administration seems to agree, and the FTC has proposed banning non-competes entirely. My concern, though, is that this might go beyond the authority of the FTC itself. I’d much rather that Congress do this and pass a law instead.
In the meantime, though, the National Labor Relations Board (NLRB), seems to be taking a different path. Back in May, the NLRB’s General Counsel released a memo saying that “overbroad” non-competes could be seen as an unfair labor practice.
“Non-compete provisions reasonably tend to chill employees in the exercise of Section 7 rights when the provisions could reasonably be construed by employees to deny them the ability to quit or change jobs by cutting off their access to other employment opportunities that they are qualified for based on their experience, aptitudes, and preferences as to type and location of work,” said General Counsel Abruzzo. “This denial of access to employment opportunities interferes with workers engaging in Section 7 activity in a number of ways—for example, workers know that they will have greater difficulty replacing their lost income if they are discharged for exercising their statutory rights to organize and act together to improve working conditions; their bargaining power is undermined in the context of lockouts, strikes and other labor disputes; and their social ties and solidarity leading to improvements in working conditions at workplaces are lost as they scatter to the four winds.”
And, now, the NLRB has acted on this. A new NLRB complaint against a spa in Ohio has charged the spa with unfair labor practices for its non-compete agreements. The complaint against Juvly Aesthetics quotes the company’s non-compete agreement extensively (and it’s quite a non-compete, as beyond just barring going to work for a competitor, it also includes a non-disparagement clause, and further bars an employee who does go somewhere else from “soliciting” clients to follow them, including barring them from even responding to client questions about where they’re working now). I mean… what the hell is this:
As part of your initial employment documentation, you signed a nonsolicitation and nondisparagement agreement that prevents you from communicating with the public, clients, or employees of Juvly/Contour Clinic beyond your termination, whether voluntary or involuntary. If you fail to comply with the following requirements, your actions will be considered a solicitation and/or tortious interference in which you will be liable pursuant to the above solicitation clause and any additional damages incurred by Juvly/Contour Clinic.
Do not contact any clients or notify them of your departure from Juvly/Contour Clinic.
Do not respond to any client questions regarding your employment status. You may only refer them to Juvly.com to book an appointment.
Should you choose to pursue work with any prior Juvly/Contour employee, retain all communications as this is considered a solicitation, their destruction is prohibited by law.
Do not discuss any information with any individual regarding your employment at Juvly/Contour Clinic.
Do not make any public statements to any party for any reason regarding Juvly employment, business practices, or treatment information.
That… pretty obviously, goes way beyond even a typical non-compete, so I can see why the NLRB chose to go after such an egregious form of a non-compete agreement. It’s unclear if this will lead to further cases against more typical non-competes, even as good as that would be for the economy.
Still, it’s good to see at least a little more recognition of how problematic non-compete agreements can be.
Filed Under: ftc, innovation, nlrb, non-compete agreements, non-disparagement, unfair labor practices
Companies: contour clinic, juvly
Comments on “NLRB Files Complaint Against Ridiculously Overbroad Non-Compete As An Unfair Labor Practice”
Damn!!!
Basically it says: If you quit working for us you will never work in this town again — or in this industry.
This is the first time I’m hearing about non-competes in detail. So an employer can just bar you from ever working anywhere ever because you worked for them? What the fuck?
Re:
It’s not supposed to be that way, but yes. Originally non-compete agreements were for high-level executives with extensive knowledge of confidential information that would be useful to a competitor, or for salesmen whose personal contacts with customers could lead to customers following the salesman when he changed employers. They were limited to barring employment with a direct competitor, so going to work for a company that didn’t compete with your former employer (whether because of industry or distance) wasn’t a problem. Since then companies have expanded what non-competes purport to cover as a way of keeping employees from being able to freely leave by making it too risky for any other company to hire them for anything.
Re:
Oh absolutely. A company tried to get me to sign a non-compete that would bar me from working for any of their competitors in the entire state (plus the two states bordering it) for EIGHTEEN MONTHS.
The job and salary were both very attractive and I walked the hell away from it. This was for a mid-level engineering role, and if I signed it I basically would have had to leave the industry for a year and a half if I ever quit.
How do they treat customers who may have a complaint?
I just cross out that stuff
While such clauses are illegal in California, that doesn’t stop clueless out-of-state employers from using a general form for onboarding. I just cross out such clauses as a anti-disparagement, non-compete, and arbitration clauses.
The one time it was an issue, the Select Group’s corporate counsel contacted me to “negotiate” my revisions. He allowed the disparagement and non-compete but wouldn’t give on arbitration. I took contract anyway but no other recruiting firm has ever made me sign an arbitration clause. Nowadays, I’d rather walk than work for such a company.
Turns out they have a terrible rep as a recruiting company on Glass Door, so I was lucky I had no issues during my time at the contract.
Re:
One employer wanted me to “voluntarily” give up my right to jury trials, so I crossed it out and initialed that. After several of working there, a Human Resources person called me in about it. We had a bit of a discussion on the meaning of “voluntary”, in which I actually got them to admit, in an e-mail (which I immediately transferred to my personal computer), that by “voluntarily” they mean I have the option of either signing it without striking the clause, or not working there anymore. They wrote that immediately, without talking to the lawyers…
It was all very weird, but nothing ultimately came of it. I don’t work there anymore.
That should say “months”. It took them quite a while to notice.
Garden Leave
The only acceptable type of non-compete is garden leave, where they pay you your entire salary and you don’t work (you get paid to putter around your garden). This would make non-competes very expensive, limiting their duration and use pretty severely.
Re:
Exactly. If a company can exert control over where and when you work, then they’re effectively your employer and they should be paying you for any and all time you’re under said control.
Re:
It’s not exactly the same, but I can also see some reasonableness to non-solicitation clauses (not the one above where you can’t even tell someone who asks you where you’re working now, that’s BS) for customers, and maaaaaybe “non-poaching” for trying to get other employees to come work for you, but that’s somewhat iffy.
Re: Re:
Mike hints at it in the first sentence, but the lack of non-competes and also non-solicitation/non-poaching clauses in California was very important to the success of “Silicon Valley”. Look up the “traitorous eight“, who all left together to found Fairchild. Some of them would then leave Fairchild to found other companies together. Had some of the employees been sued for recruiting the others, the electronics industry might still be centered around Boston, or New York and New Jersey. Or maybe another country by now.
Just in case anyone was wondering why such clauses might be seen as “iffy”.
Lawsuits as a remedy
Companies always have a lot more money than an employee.
If you have to sue, you’ve already lost.
Lawsuits as a remedy are no remedy. Outlaw (almost) all NDAs.