NLRB and FTC Are Not Giving Up On Their Quest To Ban Non-Competes

Legal Alert
from Attorney Bob

Dear WHLA Members,
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We are reaching out to highlight crucial updates from the National Labor Relations Board (NLRB) General Counsel that affect "Stay or Pay" clauses and non-compete provisions in employment agreements.

​These changes mark a significant shift towards tighter regulation, underscoring the importance of immediate action to avoid legal pitfalls.

Overview of the NLRB General Counsel’s Memo

The recent guidance from the NLRB General Counsel has put a spotlight on employment provisions that could be in conflict with the National Labor Relations Act (NLRA). Specifically, the memo targets "Stay or Pay" clauses — where employees must repay training costs if they leave the company within a certain period — and non-compete clauses that restrict workers' mobility in the labor market.

Critical Areas of Concern

• Non-Compete Clauses: These clauses are now viewed as potentially unlawful when they indiscriminately restrict all employees' labor market mobility, with few exceptions allowed.
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• "Stay or Pay" Provisions: Such clauses, which could impose financial penalties on employees who leave, are considered coercive and may violate employees' rights under Section 7 of the NLRA. These are presumptively unlawful unless they are:
  • Tied to a legitimate business interest.
  • Voluntarily entered into in exchange for a tangible benefit.
  • Reasonable in the repayment amount and duration.
  • Not requiring repayment in cases of termination without cause.

60-Day Compliance Window

​The NLRB General Counsel has provided a grace period until December 6, 2024, for employers to review and amend existing agreements to conform with these guidelines. Post this period, the NLRB will proactively enforce compliance through unfair labor practice charges.

Recommended Actions for Compliance

1. Contract Review:
   1. Thoroughly assess all employment contracts for "Stay or Pay" and non-compete clauses.
   2. Ensure repayment obligations reflect actual training costs and are not punitive.
      
      
2. Revising Restrictive Clauses:
   1. Remove clauses requiring repayment in all circumstances, particularly following involuntary termination without cause.
   2. Modify non-compete clauses that unduly limit future employment opportunities.
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3. Drafting Lawful Provisions:
   1. Clearly communicate "Stay or Pay" agreements, ensuring they are voluntary with transparent repayment terms.
   2. Set reasonable durations for obligations based on the nature and cost of training.
   3. Confirm that non-compete clauses do not apply to non-competing roles or industries.

Immediate Next Steps

• Audit Agreements: Review which agreements might violate the new NLRB guidance.
• Contract Revisions: Update necessary agreements to align with NLRB guidelines by December 6, 2024.

Monitoring FTC Developments

In related news, the Federal Trade Commission (FTC) is appealing a recent court decision that blocked its ban on non-compete agreements. This move indicates a potential progression to the Supreme Court, which we will continue to monitor and update you on.

Please take swift action to review and amend your contracts as necessary. If you need further guidance or assistance, do not hesitate to reach out to our team.
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Warm regards,
Bob Sanders

​Note: This alert is not legal advice and does not create an attorney-client relationship. It provides an overview of the law’s key components and provides factual background.

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About Attorney Bob

Bob Sanders is an Attorney and the founder of NextGen Legal. After spending over a decade in BigLaw, working with clients of all sizes across the US, he became acutely aware of the recurring barriers that deterred businesses from seeking proactive legal advice: shrinking legal budgets competing with escalating fees. This realization spurred Bob to create NextGen Legal, a firm designed to eliminate these barriers and provide clients with the high-quality legal advice they need, exactly when they need it. 

At NextGen Legal, we're transforming the traditional law firm model. Bob’s extensive experience in labor and employment law has been instrumental in shaping a service that offers both day-to-day legal counsel and rapid response for emergent issues. We strive to empower our clients with the knowledge and strategies necessary to navigate the legal landscape effectively and make confident employment decisions, without the fear of unexpected costs.
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Rated a Rising Star by SuperLawyers (an accolade reserved for only 2.5% of attorneys in Wisconsin), Bob provides strategic legal advice and counsel to companies of all sizes, helping business leaders make confident, informed decisions. His expertise spans employment law, regulatory compliance, litigation, safety, corporate strategy, and risk mitigation. Bob excels in transforming complex legal challenges into clear, actionable business solutions, offering strategic guidance to leadership teams.

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