NLRB Reverses Stance, Declares Noncompete Agreements Generally Lawful

The federal government's aggressive, multi-year campaign against noncompete agreements has officially ended at the National Labor Relations Board (NLRB). On June 26, 2026, the NLRB's Division of Advice released a pivotal memorandum declaring that noncompete agreements are generally lawful under federal labor law. This development marks a complete reversal of the agency's enforcement stance under the previous administration, effectively closing a contentious chapter in federal labor policy. In May 2023, former General Counsel Jennifer Abruzzo issued a sweeping directive—Memorandum GC 23-08—arguing that such agreements inherently violated workers' rights by chilling their ability to organize, advocate for better conditions, or threaten to quit en masse. That ambitious legal theory generated significant anxiety among corporate employers, who suddenly faced the prospect of federal unfair labor practice charges simply for maintaining standard restrictive covenants in their employment contracts. With the release of this new guidance, the NLRB has formally abandoned that theory, signaling a return to a more traditional interpretation of the National Labor Relations Act.[1][2][5]

The new legal framework stems from a specific dispute involving Biotricity, a medical technology company that found itself in the crosshairs of the NLRB's previous enforcement regime. Two former employees challenged the company's employment contracts after they resigned to work for a direct competitor. The contracts in question included a six-month noncompete clause, alongside broad confidentiality and non-solicitation provisions that applied both during their employment and for half a year after their departure. When Biotricity sued the former employees for breach of contract, the workers retaliated by filing unfair labor practice charges with the NLRB, seeking to invalidate the agreements under the Abruzzo memorandum's framework. However, under the direction of current General Counsel Crystal Carey, who was sworn in earlier this year, the Division of Advice evaluated the case through a fundamentally different lens. The division ultimately recommended dismissing the charges entirely, concluding that the company's actions did not constitute a violation of federal labor law.[2][3][5]

In its detailed legal reasoning, the memorandum explicitly stated that General Counsel Carey "is of the view that non-compete agreements do not as a general matter impact employees' rights under Section 7" of the National Labor Relations Act (NLRA). Section 7 is the bedrock provision of the NLRA, guaranteeing private-sector employees the fundamental right to self-organization, to form or join labor unions, and to engage in other "concerted activities" for the purpose of collective bargaining or mutual aid. The previous administration had creatively theorized that noncompetes suppressed these specific rights because they prevented workers from leveraging the threat of collective resignation to secure better pay or safer working conditions. By restricting job mobility, the argument went, employers were inherently restricting labor organizing. Carey's office systematically dismantled that interpretation, arguing that it stretched the statutory text of Section 7 far beyond its intended legislative scope.[2][4]

Instead of viewing restrictive covenants as anti-union weapons, the Division of Advice clarified that standard noncompete and non-solicitation clauses are generally designed to protect legitimate, recognizable business interests. These interests include safeguarding proprietary trade secrets, protecting investments in specialized employee training, and maintaining sensitive client relationships that take years to cultivate. The memorandum also greenlit the broad confidentiality clauses included in the Biotricity contracts. While labor advocates often argue that overly broad confidentiality rules prevent workers from discussing their wages or working conditions—a protected Section 7 activity—the NLRB noted that context matters. The agency concluded that employees reading a standard noncompete agreement would reasonably understand that the confidentiality provisions restrict the sharing of proprietary corporate data with market competitors, rather than prohibiting protected communications with their fellow colleagues about workplace issues.[3][5]

For corporate counsel, human resources departments, and business owners, the Division of Advice memo provides immediate and significant regulatory relief. Over the past three years, companies have been forced to navigate a precarious dual threat: the risk of state-level civil litigation over contract enforceability, compounded by the looming danger of federal labor prosecution simply for keeping standard restrictive covenants on the books. With the federal labor law threat neutralized, businesses can breathe easier. This NLRB decision aligns perfectly with a broader federal retreat on the issue of worker mobility restrictions. In late 2025, the Federal Trade Commission (FTC) formally abandoned its highly contested, nationwide rule that would have banned nearly all noncompete agreements across the American economy. Following intense legal challenges and a shift in executive branch priorities, the FTC pivoted away from sweeping rulemaking, opting instead for targeted, case-by-case enforcement against egregious monopolistic practices.[4][5]

However, legal experts are quick to warn employers that the federal government's retreat does not equate to a blank check for restrictive covenants. Instead, the withdrawal of the NLRB and the FTC has shifted the regulatory battleground entirely to the states, creating a complex, highly fragmented legal map that multi-state employers must carefully navigate. States like California, North Dakota, and Oklahoma have long banned noncompetes entirely, rendering them void and unenforceable regardless of federal policy. In 2026, other state legislatures have aggressively moved to fill the void left by Washington. For example, new laws taking effect in July 2026 include Virginia's Senate Bill 170, which strictly prohibits enforcing a noncompete if an employee is discharged without cause and receives no severance pay—effectively forcing companies to pay for the restriction. Meanwhile, Tennessee has enacted a sweeping ban that makes noncompetes unenforceable for any employee earning under $70,000 annually.[2][4][5]

Labor rights advocates argue that this emerging state-by-state patchwork leaves millions of American workers deeply vulnerable to corporate overreach. They maintain that noncompete agreements artificially suppress wage growth, limit career advancement, and trap employees in toxic or underpaying workplaces, particularly in jurisdictions with employer-friendly legal frameworks that readily enforce broad restrictions. Despite these vocal concerns from worker advocates, the NLRB's structural and ideological shift under the new administration is accelerating rapidly. The agency is systematically dismantling the aggressive, pro-labor enforcement mechanisms established between 2021 and 2024, signaling a definitive return to more traditional, business-friendly interpretations of federal labor law. The Biotricity memo is widely viewed as just one piece of a broader deregulatory agenda aimed at reducing federal friction in standard corporate operations.[3][5]

It is important to understand the specific legal weight of an NLRB Division of Advice memorandum. Unlike formal decisions issued by the full National Labor Relations Board or rulings handed down by federal appellate courts, an advice memo does not technically create binding legal precedent. Instead, it serves as an internal directive from the General Counsel's office to the agency's regional directors, instructing them on how to handle specific types of unfair labor practice charges. By publicly releasing the Biotricity memo, General Counsel Crystal Carey is broadcasting a clear prosecutorial standard: regional offices should dismiss charges that rely on the theory that noncompetes inherently violate Section 7. While a future administration could theoretically reverse this stance yet again, the current memo provides a reliable safe harbor for employers operating under the present NLRB leadership, ensuring that regional offices will not waste agency resources pursuing these specific claims.[2][5]

In light of this clarified federal landscape, human resources professionals and corporate legal teams are being advised to conduct comprehensive audits of their existing employment agreements. While the NLRB's green light removes a significant layer of federal risk, the rapid evolution of state laws requires constant vigilance. Legal advisors recommend that companies clearly document the specific business justifications for any restrictive covenants they deploy, ensuring they are narrowly tailored to protect actual trade secrets or specialized client relationships rather than simply preventing ordinary competition. Furthermore, employers utilizing remote workforces must be particularly cautious, as the enforceability of a noncompete is typically governed by the laws of the state where the employee actually works, not where the corporation is headquartered. By adopting a precise, state-specific approach to restrictive covenants, businesses can successfully protect their proprietary assets without running afoul of local regulators.[4][5]

For now, the pendulum of labor policy has swung decisively back toward employers at the federal level. The brief era of the National Labor Relations Board actively policing routine employment contracts and separation agreements has definitively closed. While companies must still exercise caution and audit their agreements to ensure compliance with an increasingly strict array of state laws, the threat of federal prosecutors invalidating standard business contracts has evaporated. Moving forward, state legislatures, local attorneys general, and state supreme courts will serve as the final arbiters of worker mobility and post-employment restrictions in the United States. Employers are advised to work closely with local counsel to tailor their restrictive covenants to the specific jurisdictions where their employees reside, ensuring that their efforts to protect trade secrets do not inadvertently trigger state-level penalties.[4][5]