Did this guy even read what he was signing? IT’S IN LATIN.
Good news for anyone who has been poached by a client or wants to strike out on their own: National Labor Relations Board (NLRB) General Counsel Jennifer Abruzzo has said that requiring workers to sign agreements not to join competing companies is usually illegal.
She made this statement via memo, a business practice as outdated as non-compete agreements. It is suspected, though the Reuters story we got this information from does not specify, said memo was written in 14pt Papyrus.
The NLRB general counsel, acting as a prosecutor to scare people, puts unfair labor practice cases in front of a board consisting of five members, the majority of whom are Democrats at the moment. Officially, the National Labor Relations Board is, according to their website, an independent federal agency vested with the power to safeguard employees’ rights to organize and to determine whether to have unions as their bargaining representative, and acts to prevent and remedy unfair labor practices committed by private sector employers and unions.
Getting back to Abruzzo and her opinion on non-compete agreements, the memo went on to say these agreements discourage workers from exercising their rights under US labor law to advocate for better working conditions.
Abruzzo, a Biden appointee who would be immediately accused of being woke in the comments if memos had comment sections, said noncompetes violate labor law “unless the provision is narrowly tailored to special circumstances justifying the infringement on employee rights.”
About a year ago, Journal of Accountancy said the legal landscape for non-compete agreements has shifted and CPA firms should confer with counsel on their legitimacy. Static and far-reaching non-competes are basically not enforceable and therefore pointless, much like everything else in public accounting. So the shift away from these agreements has already been happening, Abruzzo’s comments helpfully dogpile on this welcome development.
Not speaking directly to accounting firms though she really should, Abruzzo wrote:
Specifically, the pacts could prevent workers from resigning or threatening to do so to demand higher wages or other improvements at the workplace.
The agreements may also be lawful when they only restrict individuals’ ownership interests in a competing business.
Back to Reuters:
The US Federal Trade Commission, which enforces antitrust law, proposed a rule in January that would ban companies from requiring workers to sign non compete provisions. The proposal is pending.
A 2021 academic study found that about 18% of US workers were subject to noncompete agreements. That included more than 13% of workers earning less than $40,000 per year, the study found.
In a January statement, haters at the FTC said non-competes are “a widespread and often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses.” By stopping them, the agency estimates that the new proposed rule could increase wages by nearly $300 billion per year and expand career opportunities for about 30 million Americans.
Cool states like California, Oklahoma and North Dakota have banned non-compete agreements. A dozen or so other states have passed laws limiting their use.
According to Reuters, the people who benefit most from non-compete agreements are of course fighting to keep them alive:
Business groups have said non-competes are a crucial way for companies to protect trade secrets and that they promote competitiveness. But many Democrats and worker advocates say the agreements suppress wages and make workers less mobile.
Reuters says Abruzzo asked agency lawyers to send cases (and only cases with non-compete stuff) involving arguably unlawful non-competes to her office. Her office—depending on what is actually in the boxes, because you never know when you ask people to randomly send stuff to you—could use one of those cases to ask the board to restrict or prohibit the use of non-competes.
If the NLRB is successful, this could be a huge development for everyone who wants to strike out on their own but who hasn’t because of the specter of a (probably unenforceable) non-compete always lurking.