In the midst of the ongoing regulatory scrutiny of noncompete agreements, an NLRB judge issued a favorable finding to an employer enforcing its employment agreement which contained a noncompete provision.
As a condition of employment, Permobil Inc. gave its workers an employment agreement which contained a noncompete provision barring employees from working for competitors in the United States for one year after leaving the company. Permobil sued a former employee for violating the noncompete provision and alleged that the former employee took top-secret company information to their main competitor.
National Labor Relations Board (“NLRB”) General Counsel brought the matter before the NLRB, contending that Permobil’s employment agreement was overly restrictive and that the noncompete provision violated an employee’s Section 7 rights under the National Labor Relations Act (“NLRA”) by preventing the employee from voluntarily quitting to force their employer to meet their demands.
An NLRB Judge found that, based on the current law, the noncompete provision did not violate the employee’s Section 7 rights, reasoning that the employer had legitimate business reasons for the provision and was not driven by any unlawful motive to retaliate against the former employee. Specifically, the provision was limited to employees working on a certain secret project, indicating the importance of the confidentiality of said secret project and “whose primary thrust is the protection of [Permobil’s] business and technological interests.” The NLRB reasoned: “Any Section 7 rights affected by employees agreeing not to be employed by a competitor is remote and, in any event, overridden by the language spelling out the business reasons for the ban.”
This ruling is favorable to employers and their non-compete provisions and further indicates support for enforcing non-competes. If you have any questions about the subject of this article and its implications for your business, please contact Forework.