Impact for Employers: The NLRB General Counsel Doubles Down on Restrictive Covenants and Stay-or-Pay Provisions

The General Counsel of the National Labor Relations Board ("NLRB") issued Memorandum GC 25-01 on October 7, 2024, which establishes her intent to "urge the Board not only to find certain non-compete provisions unlawful, but also, as fully as possible to remedy the harmful effects on employees when employers use and apply them."

The General Counsel has proposed a 60-day period, starting from the issuance of the October 7 Memorandum, for employers to address and rectify any existing "stay-or-pay" provisions that may not align with legitimate business interests. This directive necessitates that employers quickly evaluate their current provisions in light of the new guidelines, as many restrictive covenants and "stay-or-pay" clauses are likely to violate Section 7, according to the General Counsel's criteria. More ›

FTC Faces Setback in U.S. District Court Over Noncompete Rule

On July 3, 2024, Judge Ada Brown of the United States District Court for the Northern District of Texas preliminarily enjoined the Federal Trade Commission ("FTC") from enforcing the Final Noncompete Rule ("Rule") against the parties to the pending lawsuit.

At this time, the prohibition on enforcement of the Rule is limited to the parties to the lawsuit. After additional briefing, the court deferred broader relief to later proceedings and intends to rule on the merits of the claim for injunctive relief on or before August 30, 2024. More ›

New Illinois House Bill Would Significantly Limit the Use of Restrictive Covenants in Employment Contracts

On January 8, 2021, a bill, HB 789 was introduced in the Illinois House that, if passed, will significantly change the treatment of restrictive covenants in the employment context. The new law would require employers to review their form contracts and modify their procedures for signing restrictive covenants. In some instances, it would forbid the use of such covenants. The bill—which would amend the existing Illinois Freedom to Work Act—is likely to pass in some form; if passed, HB 789 would go into effect on June 1, 2021. More ›