NLRB's Abruzzo says companies should pay for requiring noncompetes, 'stay-or-pay' pacts
By Daniel Wiessner
Oct 7 (Reuters) -The National Labor Relations Board's top prosecutor on Monday said her office will seek more money for workers who are required to sign agreements not to join their employers' competitors, doubling down on her earlier claims that the pacts signed by millions of U.S. workers are unlawful.
NLRB General Counsel Jennifer Abruzzo in a memo to staff lawyers also argued that like noncompete agreements, so-called "stay-or-pay" provisions signed by some workers requiring them to pay an employer if they leave their jobs violate federal labor law by restricting workers' job opportunities and discouraging organizing.
The NLRB is currently considering whether noncompete agreements violate workers' rights under the National Labor Relations Act in a case involving an Indiana HVAC company, after Abruzzo first argued that they were illegal in a 2023 memo.
About 20% of U.S. workers, or 30 million people, have signed noncompetes, and the Federal Trade Commission in April banned the agreements with few exceptions. A Texas federal judge in August blocked the ban from going into effect and the FTC is appealing.
Abruzzo, an appointee of Democratic President Joe Biden, said in Monday's memo that her office would not only prosecute employers who require workers to sign noncompete and stay-or-pay agreements, but also seek to remedy the array of harmful monetary effects the pacts have on workers.
"Simply put, the goal is to place employees in the same position, as nearly as possible, in which they would have been had the employer not maintained the unlawful provision," Abruzzo wrote in the memo.
The memo outlines a number of scenarios in which workers could be entitled to relief from the board, such as former employees demonstrating that they were out of work for a longer period than they would otherwise have been as the result of noncompete agreements. Those workers could be awarded lost wages, but only if they could show that they were blocked from applying for specific job openings, Abruzzo wrote.
Abruzzo also said she will urge the five-member board to rule that stay-or-pay agreements are generally illegal. The agreements can take various forms, including agreements to pay back sign-on bonuses and training or educational costs, and often require workers to pay thousands of dollars if they quit or are fired from their jobswithin a certain period after being hired.
Abruzzo said the agreements interfere with workers' rights to organize, join unions and collectively threaten to quit when employers ignore their complaints.
"Employees are chilled from engaging in protected activity to try to better their working conditions in their current job ... for fear that termination would trigger the payment obligation," she said.
The memo keeps with a broader effort by Abruzzo and the board to expand the remedies available to workers who are illegally fired or otherwise subjected to unlawful labor practices. In the 2022 case Thryv Inc, the NLRB ruled that employers can be ordered to make workers whole for any "direct or foreseeable" monetary harms stemming from illegal conduct.
Several companies including Starbucks and Macy's have asked federal appeals courts to block the NLRB from imposing those remedies.
They say that because the expanded remedies mirror damages available in court, ordering them in an administrative proceeding violates the companies' constitutional right to a jury trial.
Read more:
Noncompete agreements violate US labor law, official says
US bans worker 'noncompete' agreements as business groups vow to sue
US judge strikes down Biden administration ban on worker 'noncompete' agreements
US ban on worker noncompetes faces uphill legal battle
Workers entitled to more money from employers who break the law - labor board
NLRB, Macy's duel over US Supreme Court ruling's impact on agency powers
In Starbucks case, US judges 'flummoxed' over NLRB's enforcement powers
Reporting by Daniel Wiessner in Albany, New York
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