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Non-compete agreements illegal, US official concerned

A worker sits at his desk in an office building in Washington, U.S., August 3, 2018. REUTERS/Brian Snyder

BNR – According to a US labour board official, asking employees to sign non-compete agreements is typically outlawed. In a note to agency attorneys, National Labour Relations Board (NLRB) General Counsel Jennifer Abruzzo stated that so-called “non-compete agreements” hinder workers from exercising their rights under US labour law to advocate for better working conditions.

Non-compete agreements, according to Abruzzo, are illegal under labour law. He added that it’s prohibited unless the provision is tightly customised for particular circumstances justifying the breach of employee rights.

Non-compete Agreements and Workers’ Rights

The agreements, in particular, might restrict employees from leaving the job.

They may also deter individuals from threatening resignation to obtain greater compensation or other workplace reforms. In addition, he argued that the agreements may be legal if they solely limit people’s ownership interests in a rival firm.

The NLRB general counsel functions as a prosecutor, referring unfair labour practice complaints to a separate five-member board with a Democratic majority.

Legal Restrictions and Implications

The US Federal Trade Commission suggested a regulation that would prohibit employers from compelling employees to sign non-compete agreements. However, the concept has been pending since it was initially suggested in January.

The US Federal Trade Commission is in charge of enforcing antitrust laws.

According to a 2021 academic survey, roughly 18 per cent of US workers were subject to non-compete agreements. According to the research, this includes more than 13 per cent of workers earning less than $40,000 annually.

Non-compete agreements are prohibited in California, Oklahoma, and North Dakota. Furthermore, numerous other states have implemented legislation restricting the use of such agreements.

Non-compete agreements, according to businesses, are an important tool for firms to preserve trade secrets and improve competitiveness. Many Democrats and labour groups, however, argue that the agreements lower wages and make employees less versatile.

Abruzzo requested that agency lawyers forward cases involving allegedly illegal non-compete agreements to her office. Her office might use one of those cases to persuade the board to limit or prohibit such agreements.


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