The NLRB’s Approach to Work Rules and the Shift in Noncompete Clauses

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NLRB’s Revised Framework for Evaluating Employer Work Rules

In a significant shift in labor law interpretation, the National Labor Relations Board (NLRB) has been actively applying a new standard to assess the legality of employer-imposed work rules. This comes after a series of decisions against various companies, most notably an ExxonMobil Corp. subsidiary, where it was determined that certain workplace policies violated the newly established guidelines. These guidelines were introduced in a landmark decision in August 2023, involving Stericycle, Inc., setting a precedent for evaluating employer rules within the workplace.

Under the Stericycle decision, the board departed from the previously more employer-friendly standard, implementing a new framework. This framework necessitates NLRB prosecutors to demonstrate that any disputed rule might deter workers from exercising their rights under the National Labor Relations Act. Simultaneously, it allows employers to justify their policies by proving they serve legitimate interests that cannot be achieved through less restrictive means.

To date, administrative law judges (ALJs) have reviewed numerous employer policies, finding two-thirds of them in violation of this new standard. This scrutiny has led to the rejection of various types of work rules, including solicitation policies, nondisclosure requirements, and restrictions on employees’ off-duty conduct, among others. Notably, Starbucks Corp. and United Electrical Contractors Inc. faced disapprovals for several of their internal policies under this rigorous examination.

  

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State-Level Movements to Restrict Noncompete Agreements

Parallel to the evolving landscape of work rules, there has been a notable trend across several states aiming to limit the use of noncompete agreements. These contractual clauses, designed to prevent employees from joining competitors post-employment, have been under scrutiny for potentially overreaching, especially concerning lower-wage workers.

Washington state and Maine have made strides in refining the legal boundaries of noncompete agreements. Washington state has recently clarified requirements for notifying new hires about such agreements, expanding protections to include low-income workers. Meanwhile, Maine is narrowing the permissible business justifications for noncompetes, focusing on the protection of trade secrets and ownership interests.

The conversation around noncompetes is not confined to these states, with legislative proposals in Connecticut, Illinois, and New York City suggesting varying degrees of restriction. Notably, New York’s legislative efforts continue to evolve, with an eye on the Federal Trade Commission’s impending regulation, which aims to impose a nationwide limitation on noncompete clauses.

This regulatory landscape highlights a growing consensus on the need to balance employers’ interests with workers’ rights to mobility and free labor. With California, Minnesota, North Dakota, and Oklahoma leading by example, the push against noncompete agreements signifies a significant shift towards more equitable labor practices.

Implications for Employers and Employees

The NLRB’s adoption of a new standard for evaluating work rules, alongside the state-level initiatives to limit noncompete agreements, reflects a broader movement towards enhancing worker protections. For employers, this evolving legal environment demands a careful reevaluation of workplace policies and employment contracts to ensure compliance with both federal and state regulations.

As these legal frameworks continue to take shape, they promise to offer greater clarity and fairness in the employer-employee relationship, fostering a more balanced and respectful workplace culture.