NLRB General Counsel Reverses Precedent, Declares Non-Compete Agreements Generally Lawful Under NLRA

For the roughly 30 million American workers bound by non-compete agreements, the federal shield against post-employment restrictions has officially evaporated. Employees who sign contracts limiting their ability to jump to a competitor can no longer rely on the National Labor Relations Board (NLRB) to invalidate those clauses, shifting the legal battleground entirely back to individual state legislatures. The shift provides immediate relief to corporate employers who had faced the threat of federal prosecution simply for maintaining standard employment contracts, fundamentally altering the balance of power in workplace negotiations.[1][2]

The regulatory pivot was cemented in a newly released advice memorandum from NLRB General Counsel Crystal Carey. The directive formally declares that non-compete agreements do not as a general matter impact employees' rights under Section 7 of the National Labor Relations Act (NLRA). This effectively reverses a controversial 2023 policy that had classified most restrictive covenants as presumptively illegal under federal labor law. By issuing the memorandum, the NLRB's top prosecutor has signaled to regional directors across the country that the agency will no longer pursue unfair labor practice charges against companies based solely on the existence of non-compete clauses.[1][3][4][5]

The memorandum stems from a specific dispute involving Biotricity, Inc., a medical diagnostic company. Two former employees who had signed six-month non-compete and confidentiality agreements left the firm to work for a direct competitor, prompting Biotricity to sue them for breach of contract. The employees subsequently filed unfair labor practice charges with the NLRB, arguing that the lawsuit and the underlying agreements themselves constituted illegal retaliation for engaging in protected workplace activities. The case became a primary test for how the newly constituted labor board would handle the aggressive enforcement posture inherited from the previous administration.[4][6]

Under the NLRB's new framework, the Division of Advice dismissed the workers' charges entirely. The agency concluded that the six-month non-compete clause did not restrict the employees' rights to organize, form a union, or collectively bargain. Furthermore, the board found that confidentiality clauses protecting employee lists and payroll data represent reasonable business protections in competitive industries, rather than unlawful attempts to suppress wage discussions among staff. The ruling establishes a clear precedent that standard efforts to protect trade secrets and client relationships do not inherently violate federal labor statutes.[1][4]

The decision marks the final nail in the coffin for the Biden administration's aggressive labor agenda regarding restrictive covenants. In May 2023, former General Counsel Jennifer Abruzzo issued a sweeping memo arguing that non-competes inherently chilled workers' rights under the NLRA. Abruzzo contended that by cutting off access to alternative employment, non-competes prevented workers from threatening to quit in order to leverage better pay or working conditions from their current employers. That interpretation represented a radical departure from decades of established labor law, effectively attempting to regulate corporate competition through the lens of union organizing rights.[3][5]

Abruzzo's interpretation sent shockwaves through corporate America, as it exposed employers to federal unfair labor practice charges simply for maintaining standard employment contracts. Following the change in presidential administration, Acting General Counsel William Cowen rescinded Abruzzo's memo in February 2025, halting active prosecutions but leaving the agency's official stance in limbo. Carey's new directive now replaces that void with an affirmative defense of the practice, stating explicitly that lawsuits filed in state court to enforce reasonable non-compete agreements are not inherently retaliatory or preempted by the NLRA.[3][4]

The legal reasoning in the new memorandum hinges on how a reasonable employee interprets a restrictive covenant in the context of their daily work. The current General Counsel reasoned that workers subject to these agreements understand they are designed to prohibit the disclosure of confidential information to competitors, rather than to restrict protected communications or organizing efforts between colleagues. Because the primary intent and practical understanding of the contract focus on external competition rather than internal workplace dynamics, the NLRB concluded that Section 7 rights are not meaningfully implicated.[6]

While the NLRB cleared the non-compete and confidentiality provisions, the memorandum noted that non-solicitation and non-disparagement clauses in the Biotricity contracts were arguably unlawful because they could theoretically prevent employees from discussing workplace grievances. However, the agency still dismissed the charges because the employer had not actively attempted to enforce those specific clauses against the departing workers. This signals a highly pragmatic approach to enforcement going forward: the NLRB will look at how a contract is actually utilized in practice, rather than penalizing companies for theoretical ambiguities in the text.[1][6]

For corporate counsel and human resources departments, the ruling provides immediate federal clarity but does not offer a blank check to lock workers into their jobs. The NLRB's withdrawal from the non-compete arena leaves enforcement entirely to a complex, rapidly evolving patchwork of state laws. States like California, Minnesota, and Oklahoma ban non-competes entirely, rendering them void regardless of federal labor policy. Other states impose strict salary thresholds, duration limits, or advance-notice requirements that employers must navigate carefully to ensure their contracts hold up in court.[1][2][5]

The recalibration at the NLRB underscores a broader federal retreat from regulating post-employment restrictions, following the Federal Trade Commission's earlier abandonment of its own attempt to implement a nationwide non-compete ban. With federal agencies stepping back from the issue, the battle over worker mobility and corporate trade secrets has definitively returned to local jurisdictions. For now, the enforceability of a non-compete agreement will depend entirely on state geography and the specific, tailored language of the contract, rather than sweeping federal labor policy.[1][2][3]