NLRB Valentine’s Day present: Acting GC rescinds memos on noncompetes and TRAPs

As you will recall, in the past two years, former General Counsel of the National Labor Relations Board, Jennifer Abruzzo, issued two memoranda declaring noncompetes, training repayment agreements (pejoratively called “TRAPs”), and other restrictions were unlawful.

Specifically, the first memorandum (GC 23-08), issued on May 30, 2023, had the subject line, “Non-Compete Agreements that Violate the National Labor Relations Act.” As I described it at the time, the memo outlined why Ms. Abruzzo believes that 200-plus years of noncompete law violates the NLRA. Despite the name, that memo was not limited to noncompetes. It opened the door for the NLRB to assert that no-recruit agreements, fiduciary duty laws (even just the duty of loyalty), and confidentiality/nondisclosure agreements (at least if they could be interpreted to limit job opportunities) violated the NLRA.

The second memorandum (GC 25-01), issued on October 7, 2024, had the subject line, “Remedying the Harmful Effects of Non-Compete and ‘Stay-or-Pay’ Provisions that Violate the National Labor Relations Act.” This is how Ms. Abruzzo described the memorandum:

Part I of this memo provides additional information about my intent to urge the Board not only to find certain non-compete provisions unlawful but also, as fully as possible, to remedy the harmful effects on employees when employers use and apply them. In addition, I believe that certain “stay-or-pay” provisions, under which an employee must pay their employer if they separate from employment, infringe on employees’ Section 7 rights in many of the same ways that non-compete agreements do and that such provisions therefore also violate Section 8(a)(1) of the Act unless narrowly tailored to minimize that infringement. Part II of this memo sets forth my proposed framework for assessing the lawfulness of such provisions, the remedies I intend to seek before the Board, and the circumstances under which I will decline to issue complaint against preexisting stay-or-pay arrangements.

Yesterday, February 14 (Valentine’s Day), the current NLRB Acting General Counsel, William B. Cowen, issued a memorandum (25-05) rescinding both of the above memoranda (among others). While it is no surprise, it does pretty much eliminate the risk created by Ms. Abruzzo’s memos.

Despite all of this, it is still necessary to comply with applicable state laws, which are constantly changing.  And, separately, it is always wise to limit the use of noncompetes (and other restrictive covenants) to those employees (and others) for whom you need them.

*Thank you to Max Perlman for alerting me to the NRLB memo. 

Firm resources: 

We know how hard it is to keep up with the ever-changing laws and requirements around the country for how you can protect your trade secrets, customer goodwill, and the integrity of your workforce. To help, we have created the resources below (available for free). Each chart is regularly updated to reflect the latest developments. 

	50-State Noncompete Law Chart, the first of its kind and regularly updated (downloadable PDF) (to be updated for the new exemptions in Illinois and Pennsylvania)50-State and Federal Trade Secret Law Chart, providing a comparison of the trade secrets laws nationally to the Uniform Trade Secrets Act (downloadable PDF)
	Chart of Noncompete “Low-Wage” Thresholds and Criteria (downloadable)
	Notice requirements summary chart, providing details for each of the 8 states (plus D.C.) that has notice requirements related to noncompetes (downloadable PDF)
	“Changing Trade Secrets | Noncompete Laws” (dedicated blog page) now provides a current detailed summary of the changing landscape of trade secret laws and noncompete laws around the country, state by state and at the federal level
	Trade secret and other legitimate business interest protection plan strategy and checklist

We hope you find all of these resources useful. More will be coming.

And please note, we are grateful for all of the input we’ve received over the years. We welcome any suggestions for improvements that you may be willing to share.