What happened?

On October 7, 2024, the National Labor Relations Board (NLRB) General Counsel (GC) issued a memorandum (GC Memorandum 25-01) on aggressive “prosecution” of stay-or-pay agreements and non-compete agreements.


Quick Summary:

• The NLRB memo provides a framework for assessing the legality of various “stay-or-pay” agreements and explains how employers can adjust existing arrangements to avoid prosecution.
• Additionally, it outlines the intent of the General Counsel to prosecute employers who use non-compete and “stay-or-pay” provisions and to remedy the financial harm these provisions cause employees.

What are the details?

1. Non-Compete Agreements:
   
   
   • The memo encourages the NLRB to impose broad make-whole remedies for employees affected by non-compete agreements that violate the NLRA, including compensating employees for lost job opportunities, periods of unemployment, and other related expenses.
   • Employers may be required to compensate current and former employees for various harms, including lost compensation, periods of unemployment, and moving or retraining costs.
     
2. Stay-or-Pay Agreements:
   
   
   • These agreements are described as “presumptively unlawful” unless the employer can prove they serve a legitimate business interest and are narrowly tailored.
   • The memo outlines a framework for assessing the lawfulness of these provisions, requiring that they be:
     (1) voluntarily entered,
     (2) have a reasonable repayment amount and stay period, and
     (3) not require repayment if the employee is terminated without cause.
     
3. Employee-Favored Resolutions: Any uncertainty in evidence supporting claims for these remedies should be resolved in favor of the employee.
   
   
4. Updated NLRB Notices: The GC suggests updating NLRB notices to inform employees about compensation for harm from non-compete agreements and to contact regional offices if they have evidence of unenforceable non-competes.
   
   
5. Compliance and Prosecution: Employers must fix existing stay-or-pay provisions by December 6, 2024, if they serve a legitimate business interest. After this deadline, the NLRB will issue complaints against non-compliant arrangements without exceptions.
   
   
   Business Considerations

• Review their non-compete and stay-or-pay agreements due to the recent NLRB memo. It is important to ensure that these agreements protect business interests while complying with regulations.
• Replace unlawful stay-or-pay provisions before the December 6, 2024, deadline.
  
  Source References

• GC Memorandum 25-01

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