Companies should revisit their use of noncompete provisions in employment contracts that keep workers from switching jobs, the US labor board’s top prosecutor said, amplifying efforts in Washington to outlaw the practice.
“I would want employers to really reconsider their policies around noncompetes,” Jennifer Abruzzo, general counsel of the National Labor Relations Board, said Wednesday in an interview with Bloomberg News.
The NLRB enforces federal labor law, and Abruzzo runs the agency’s enforcement arm, which is currently litigating cases against leading US companies including Amazon.com Inc., Apple Inc., Starbucks Corp., and Tesla Inc. among others.
Cases Abruzzo prosecutes are considered by agency judges, whose rulings can be appealed to the NLRB members in Washington DC, whose decisions establish new nationwide precedents. “I hope the board takes that up over the next year,” Abruzzo said on noncompetes. “It should be a priority of theirs.”
About one in five Americans is bound by a noncompete agreement, though the number is much higher in some industries like health care where as many as 45% of workers have such agreements.
Abruzzo issued a memo in May arguing that noncompete provisions tend to violate federal labor law. Last week, her office approved a settlement agreement between former employees and an Ohio aesthetics treatment company it had accused of imposing illegal noncompete clauses on workers.
Abruzzo said in the interview she doesn’t see a need for noncompetes “when it comes to low-wage, middle-wage workers, even high-wage workers, unless there’s some significant trademark or proprietary information that they have obtained that will give a competitor an advantage.”
Some states, like California, already outlaw the practice. New York was close to becoming the fifth state to outlaw noncompete clauses in virtually all employment contracts until New York Governor Kathy Hochul vetoed legislation in December amid pressure from Wall Street, hospitals and business groups.
The Federal Trade Commission, which enforces US antitrust and consumer protection laws, proposed banning noncompetes last year, though business groups oppose the proposed rule and the US Chamber of Commerce has threatened to sue should it be finalized. The agency is expected to issue a final version of its rule later this year.
Separately, Abruzzo raised concerns about increased use of artificial intelligence in the workplace, saying that intrusive surveillance of employees or abusive algorithmic management could infringe on workers’ rights to engage in protected activity like lobbying for improved conditions.
This article was provided by Bloomberg News.