A recent complaint from the National Labor Relations Board (NLRB) challenged the use of non-compete agreements in Ohio employment contracts. This complaint, issued by the NLRB’s Cincinnati office, asserted that such agreements may constitute unfair labor practices. With potential consequences that could reshape labor laws, Ohio businesses need to stay informed and proactive.
Have you reviewed your employment agreements recently? Let’s talk about making sure you are compliant and up to date with the law. Contact the Labor & Employment Group at Gertsburg Licata today.
The Ohio Complaint: A Watershed Moment
The September 1st complaint originated from the accounts of three former employees of Juvly, an Ohio-based company specializing in outpatient aesthetic services in clinical and spa environments nationally. Two of these employees claim that Juvly demanded repayment of training costs—ranging from $50,000 to $60,000—after they accepted nurse practitioner positions with other companies, violating their non-compete agreements. These demands, often referred to as “training repayment agreement provisions,” or TRAPs, are claimed to violate the National Labor Relations Act’s rule against “interfering with, restraining, and coercing employees in the exercise of their rights. With the average cost of employee training being $1,252, [1] there is no doubt that more employers are including TRAPs in employment agreements.[2] But with this September 2023 NLRB complaint, is it wise for Ohio businesses to continue using TRAPs?
Each employee’s case in the Juvly complaint differs slightly, but they all underscore issues with their non-compete agreements. Whether it’s the demand for training cost reimbursement, prohibitions on disparaging former employers, or restrictions on soliciting clients or employees, these clauses now face scrutiny as potential unfair labor practices.
Noncompete Agreements Under the Microscope
The heart of the issue lies in whether these noncompete agreements infringe on the rights of employees, as protected by the National Labor Relations Act (NLRA). The NLRB’s complaint suggests that these agreements interfere with employees’ rights to change jobs or quit, thereby restricting access to alternative employment opportunities. In turn, this could be viewed as a violation of NLRA-protected activities. Although certain noncompete agreements may remain lawful—especially those related to independent-contractor relationships or preventing employees from managing competing businesses—many could face challenges in Ohio courts.
A Broader Trend: The Biden Administration’s Stance
The Ohio complaint isn’t an isolated incident. The Biden administration has intensified its focus on noncompete agreements. The Federal Trade Commission (FTC) proposed a ban on most of these agreements earlier this year. Additionally, NLRB General Counsel Jennifer Abruzzo issued a memo in May emphasizing her belief that noncompete provisions might violate the NLRA. She urged regional directors to file complaints accordingly.
Abruzzo’s memo underscored the potential for non-compete agreements to be seen as impeding job changes or resignations, thereby curtailing access to other job opportunities. The NLRB’s position is clear: this could compromise NLRA-protected activities. While certain noncompete agreements might still be lawful, those that restrict employees’ mobility within their fields may face increased scrutiny in Ohio.
The Impact on Ohio Businesses
One of the critical points of focus in the complaint against Juvly is the potential transformation it could bring to the employment landscape in Ohio, primarily concerning nonsupervisory employees. While supervisors and managers typically fall outside the scope of the NLRA, the NLRB’s evolving interpretation could wield substantial influence over nonsupervisory workers, bringing forth several noteworthy implications for Ohio businesses:
1. Enhanced Employee Mobility
If the NLRB’s interpretation gathers momentum and noncompete agreements are deemed unfair labor practices, it will lead to an increased sense of empowerment among nonsupervisory employees. These workers, who previously might have felt bound by restrictive clauses in their employment contracts, could experience newfound freedom to explore opportunities within their respective fields. ‘
2. Potential Improvements in Wages and Working Conditions
Empowered employees who are free to switch jobs more readily can exert upward pressure on wages and working conditions. In a competitive labor market, employers may find themselves compelled to offer more attractive compensation packages and improved working environments to attract and retain skilled talent. This shift can lead to a more dynamic, worker-friendly labor market in Ohio.
3. Contractual Reassessment for Ohio Businesses
Ohio business owners must closely evaluate the potential consequences of these developments on their operations. While supervisors and managers may remain unaffected, the broader workforce could experience increased mobility and bargaining power. As such, employers should carefully reassess their employment contracts, particularly noncompete agreements, to ensure they align with evolving labor regulations and workforce expectations.
4. A Balance Between Protection and Mobility
Navigating this changing landscape requires Ohio businesses to strike a balance between protecting their investments in employee training and respecting their workers’ rights and mobility. Crafting employment contracts that achieve this balance is crucial for maintaining a harmonious and legally compliant work environment.
5. Continued Monitoring and Adaptation
As these discussions and interpretations evolve, Ohio business owners should stay vigilant. Staying informed about developments in labor law, monitoring changes in employment practices, and adapting to shifts in the labor market will be paramount. Engaging with legal experts who specialize in labor law can provide valuable guidance in navigating this evolving terrain.
The NLRB’s recent actions on noncompete agreements are part of a broader trend aimed at safeguarding workers’ rights. The complaint against Juvly in Ohio represents a pivotal moment in labor law nationwide. Ohio business owners must adapt and navigate these changes while fostering fair employment practices in their organizations. Ohio businesses should stay vigilant, adapt and ensure their practices align with the shifting legal environment. The outcomes of this case and the broader debate on noncompete agreements will undoubtedly have far-reaching implications for businesses across the state.
The experienced Labor & Employment attorneys at Gertsburg Licata are here to review your agreements, talk with you about your procedures, and ensure that you are moving your business forward with greater freedom and growth. Contact us today.
Jonathan Stender, Esq.,a partner in the Labor & Employment practice group, brings over 20 years of experience representing management and employers in workplace law. Formerly a partner at Dworken & Bernstein, Jon specialized in heavy litigation, administrative practice, and counseling clients through employment law matters and Class Actions. Beyond his legal practice, Jon is an avid Cleveland sports enthusiast and holds a soft spot for his alma mater, the Washington Huskies. For consultations or inquiries, Jon can be reached at [email protected] or (216) 573-6000 x7013.
Disclaimer: The information provided in this article is intended for general informational purposes only and should not be construed as legal advice. It does not establish an attorney-client relationship, and any reliance on the information contained herein is done at your own risk. For specific legal guidance tailored to your business and jurisdiction, it is recommended to consult with a qualified attorney who can provide professional advice based on your unique circumstances.
[1] https://www.indeed.com/career-advice/career-development/cost-to-train-new-employee
[2] Bartz, D. (2022). “More U.S. Companies Charging Employees for Job Training if They Quit.” Reuters. https://www.reuters.com/world/us/more-us-companies-charging-employees-job-training-if-they-quit-2022-10-17/
