Key Takeaways
- The National Labor Relations Board’s (NLRB or Board) Division of Advice recently recommended that a Regional Office dismiss an unfair labor practice charge premised on the existence of employee noncompetes.
- This recommendation of dismissal follows the NLRB’s current view on noncompetes and is a further rebuke of the NLRB’s interpretation of noncompetes under the prior General Counsel.
- With the NLRB still on the sideline for noncompete regulation, the patchwork of state law obligations will continue to expand and dominate employers’ compliance requirements.
On June 26, the NLRB’s Division of Advice (Division) released a memorandum in Biotricity, Inc., Case 08-CA-326334, addressing whether an employer’s noncompete agreement violated Section 8(a)(1) of the National Labor Relations Act (Act).
The Division held, in line with then-Acting General Counsel William B. Cowen’s Feb. 14, 2025 General Counsel Memorandum, that “[u]nder current law, an employer does not violate the Act by maintaining non-compete provisions. . . . The General Counsel is of the view that non-compete agreements do not as a general matter impact employees’ rights under Section 7. Accordingly, the non-compete language within the Non-Compete Agreement does not violate Section 8(a)(1).”
The Division also found that the confidentiality obligation, although broad, was lawful. Specifically, the Division stated that claiming “all information not generally known to the public” is confidential is broad but that the enumerated examples, including “payroll information, . . . personnel information, [and] employee lists,” plus “dozens of other examples of purely business-related types of information” “clearly explains the Employer’s strong confidentiality interests in the highly competitive medical-technology industry.” The Division applied basic logic to conclude that “[v]iewed through this lens, employees would reasonably understand that the confidentiality provision restricts them from sharing confidential information with competitors, not Section 7-protected communications with fellow employees.”
Notably, the Division did not simply rubber-stamp Biotricity’s entire agreement. Rather, it found that certain unidentified “portions of the non-solicitation, inducement-of-third-parties, and non-disparagement clauses are arguably unlawful.” However, it found that those provisions were moot in the current case because the employer did not seek to enforce them, and thus the allegations related to them were “dismissed on noneffectuation grounds.”
The ‘Biotricity’Dispute
Biotricity involved two former employees who signed six-month noncompete agreements restricting their ability to work for competitors and their use of confidential information, along with nonsolicitation and nondisparagement provisions.
After the employees joined a competitor, Biotricity sued to enforce the agreements, and the employees responded by filing unfair labor practice charges alleging the noncompete agreement violated Section 8(a)(1) of the Act.
A Shift Away from Prior NLRB Guidance
During the Biden administration, NLRB General Counsel Jennifer Abruzzo took the position, reflected in GC 23-08, that certain restrictive covenants and workplace agreements could unlawfully restrain employees’ Section 7 rights by discouraging protected activity, including seeking better working conditions, organizing or acting together with co-workers.
That position formally shifted on Feb. 14, 2025, when Cowen issued GC 25-05, which rescinded several of Abruzzo’s memoranda, including GC 23-08. The Biotricity Advice Memorandum reflects this change in interpretation.
What ‘Biotricity’ Means for Employers
The Biotricity memorandum, although not binding on the Board, is a further signal that the Board is moving away from the prior administration’s expansive view that noncompete obligations generally interfere with employees’ Section 7 rights. However, even if lawful under the Act, employers must still ensure that their noncompete, confidentiality, and other restrictive covenants comply with state law, which is quickly evolving into a further patchwork of disjointed and technical obligations across the country.
