Even after a Federal District Court judge in Texas struck down the looming FTC Ban on non-competes this past August, non-competes are still a hot topic in labor news. On Monday, Jennifer Abruzzo, the National Labor Relations Board’s (NLRB) General Counsel, issued a memo expanding on her May 2023 memo. The latest memo not only reemphasized her view that non-competes violate the National Labor Relations Act (NLRA) by chilling employees’ rights to engage in protected concerted activity to improve working conditions, but also stated that “Stay-or-Pay” provisions have the same effect. “Stay-or-Pay” provisions often encompass educational repayment contracts, sign-on bonuses, retention bonuses, and training repayment agreement provisions. As a reminder, the NLRA applies to all employers, regardless of the presence of a union, and it protects all non-management employees. Employees at the supervisor level or above are not covered by the NLRA.
Abruzzo discussed her intent to have the NLRB seek aggressive enforcement against employers who require their employees to sign non-competes and “Stay-or-Pay” provisions, and to provide monetary remedies to employees who have suffered harm from these provisions. For an employer to rebut the NLRB’s presumption that these provisions are unlawful, the employer must show that the provision serves a legitimate business interest, is voluntary, has a “reasonable and specific” repayment amount, has a “reasonable stay period,” and requires no repayment if an employee is terminated without cause. If an employer fails to show the provision is lawful, the employee may be entitled to monetary damages.
In light of this memo, Abruzzo is allowing 60 days for employers to amend any unenforceable “Stay-or-Pay” provisions for nonmanagement employees covered by the NLRA to avoid potential prosecution. If employers have any “Stay-or-Pay” provisions that include an unreasonable stay period, mandate a repayment if an employee is terminated without cause, or include a repayment amount that is greater than the cost of the benefit to the employee, such provisions should be amended and notice of any revisions should be given to the employee.
In recent months, our attorneys at Ruder Ware have seen a number of cases where the NLRB has filed charges on this issue and related issues.
