NLRB Makes Good on Its Promise to Challenge Non-Competes

November 22, 2023

In her Memorandum issued on May 30, 2023, General Counsel Abruzzo announced her belief that non-competes should be discouraged, if not outright prohibited, as they chill employees’ rights to concerted activity in violation of Section 7 of the National Labor Relations Act. According to Counsel Abruzzo, due to non-compete and other restrictive provisions, employees lose their ability to engage in concerted activity by threatening to resign and seek better working conditions, seek work with a competitor which may provide better working conditions, and speak up on behalf of themselves and others due to the fear of the loss of their job and the inability to secure one that is noncompetitive.

NLRB’s Complaint Against Harper Holdings, LLC d/b/a Juvly Aesthetics

On September 1st, the National Labor Relations Board’s office in Region 9 issued a complaint against Harper Holdings, LLC d/b/a Juvly Aesthetics. This complaint consolidates violations that the NLRB found in both Ohio and Minnesota, which included:

  • Imposing allegedly unlawful non-compete, non-disparagement, non-solicitation, and confidentiality restrictions.
  • Demanding two employees to repay the costs of training during their employment.
  • Restricting employees from discussing their terms and conditions of employment including their individual employment contracts, bonuses, and evaluations.

Allegations Against the Company

At issue is the company’s trifold attempt to bind the employees to various restrictions on competition and discussions involving the company. The alleged first offense involves the offer letter which included prohibitions against:

  1. Encouraging any employee to leave the company.
  2. Hiring any employee of the company for oneself or a third party.
  3. Interfering with any relationship of the company.
  4. Disclosing any confidential information, including salaries, bonuses, and compensation.

Additionally, the offer letter provided that “threats, disparagement, or intimidation of management or other employees” would be considered insubordination and were prohibited, possibly resulting in discharge.

Secondly, the Handbook prohibited employees from speaking to the media and required employees to:

“refrain from any conduct or communication, which may damage the goodwill, brand, or business of The Company.”

Thirdly, employees were required to sign written agreements that reiterated the restrictions in the offer letter plus a further agreement to not compete with the company. Upon any violation, the employee would be liable for all training expenses incurred by the company. The company continuously sought to enforce these restrictions with various reminders made verbally, through telephone instructions, and Slack messages.

Violations of Employee Rights

According to the complaint, two employees who protested the foregoing restrictions and activities of the company were discharged and required to pay back their training expenses, resulting in violations of their rights to concerted activity under Section 7 of the National Labor Relations Act.

Relief Sought by the Complaint

The complaint seeks all unjust and proper relief, including:

  • Rescission of the allegedly unlawful policies.
  • Demands for reimbursement of training costs.
  • Make-whole monetary relief for the former employees.

Make-Whole Monetary Relief

As seen in the Thryv, Inc. and International Brotherhood of Electrical Workers, Local 1269 Cases 20-CA-250250 and 20-CA-251105 decided earlier this year, make-whole monetary relief includes all “direct and foreseeable pecuniary losses” by the employee. This can exceed lost compensation and benefits, aiming to restore the employee to the same position as before separation of employment. Such remedy can include payments for medical expenses due to lost health care coverage and even unpaid mortgage payments and penalties resulting from lost compensation.

Implications for Employers

Given the NLRB’s recent aggressive stance on clearing the workplace of non-compete and similar restrictive provisions, employers should scrutinize such provisions to assure they are narrowly tailored, to the extent possible, and outside the reach of the NLRB’s legal scope.

We will be monitoring the progress of this complaint through the administrative process. If you have questions or need assistance reviewing your handbooks, policies, employee agreements, and severance agreements, please contact Maribeth Meluch (MM@kjk.com; 614.427.5747) or any other attorney in our Labor and Employment Practice Group.