On February 14, 2025, National Labor Relations Board Acting General Counsel William Cowan rescinded several previously issued memos, including two related to restrictive covenants: (1) GC Memorandum 23-08, Non-Compete Agreements that Violate the National Labor Relations Act, and (2) GC Memorandum 25-01, Remedying the Harmful Effects of Non-Compete and Stay-or-Pay Provisions that Violate the National Labor Relations Act.  The rescission of these memos issued by his predecessor, Jennifer Abruzzo, foreshadows a shift in the NLRB’s approach to restrictive covenants.

GC Memos Impacting Non-Competes

During the previous presidential administration, Abruzzo used GC memos—nonbinding missives with guidance from the NLRB’s general counsel—to advocate for significantly limiting restrictive covenants.

On May 30, 2023, Abruzzo issued GC Memorandum 23-08, stating her belief that non-compete agreements interfere with employees’ exercise of rights under Section 7 of the National Labor Relations Act.  She encouraged the NLRB to declare that the proffer, maintenance, and enforcement of such agreements violates the NLRA, “unless the provision is narrowly tailored to specific circumstances justifying the infringement on employee rights.” 

On October 7, 2024, Abruzzo reiterated her commitment to weakening restrictive covenants by issuing Memorandum 25-01.  In addition to arguing that many “stay-or-pay” provisions—provisions that require employees to repay the employer if they leave before a specific time—were presumptively unlawful and proposing a framework for analyzing such provisions, Memorandum 25-01 advocated for “make-whole” relief as the proper remedy for unlawful non-competes.  Instead of the NLRB’s usual practice of ordering rescission for unlawful contract terms, Memorandum 25-01 encouraged the NLRB to adopt a “make-whole” relief approach to remedies.  This could include, for example, the difference in pay from a higher-paying job that the employee did not pursue because of the non-compete.  Abruzzo recommended that the Board amend its standard notice to notify employees they could be entitled to such forms of relief and urged the Board to order that employers pay the legal fees and costs for an employee subject to an unlawful non-compete. 

While these memos represented Abruzzo’s beliefs on how the NLRB should interpret the NLRA and had no binding legal effect on how the NLRB resolved issues regarding non-competes, they were nonetheless significant.  Abruzzo represented the prosecutorial arm of the NLRB and encouraged Regions to issue complaints based on her beliefs regarding the permissibility of non-competes.  And, had the NLRB faced these issues, these memos may have influenced the Board’s ultimate decisions on these non-compete issues.

What Do the Rescissions Mean for Employers?

While some individual administrative law judges have ruled on complaints involving restrictive covenants, with such rulings being a mixed bag in terms of the covenants’ lawfulness, the NLRB itself did not address exceptions filed in these cases—or ultimate questions about the lawfulness of non-compete and non-solicitation provisions—before the end of the Biden administration.  The rescission of the Abruzzo memos makes it less likely that a new general counsel will pursue complaints against employers based on the use of restrictive covenants.  And, with the likelihood of a majority-Republican NLRB in the near future, it is unlikely that the NLRB would ultimately rule in a manner consistent with Abruzzo’s memos if the Board had to rule on those issues.  

Still, employers should understand the risks associated with implementing non-compete and non-solicitation covenants for non-supervisory employees subject to the NLRA.  While restrictive covenants for supervisory employees—who are not subject to the NLRA—may receive less scrutiny than those for non-supervisory employees, employers should exercise caution when drafting and implementing these covenants.  Employers must be cognizant of wage thresholds, should tailor such covenants to protect the employer’s legitimate business interests, and should stay apprised of developments in state laws, which govern the enforceability of restrictive covenants.