In a noncompete lawsuit, the NLRB, Cincinnati, Ohio Region filed a consolidated complaint against a medical spa that used noncompetes and other restrictive covenants.
The complaint alleges numerous violations of the National Labor Relations Act (the “Act”), including, but not limited to:
- Maintaining unlawful confidentiality;
- Non-disparagement;
- Noncompete;
- Non-solicitation; and
- Training repayment provisions
According to the NLRB, the policies violate the rights of employees in the exercise of their rights guaranteed under Section 7 of the Act.
The Contents of the Noncompete Lawsuit
The noncompete at issue provides:
During the term of employment and for 24 months following termination of employment for any reason without the prior written consent of The Company:
(1) Employee is prohibited from practicing aesthetic medicine and providing the specifically listed services: neurotoxins, fillers, deoxycholic acid, collagen stimulators, CoolSculpting, anti-aging lasers, and hair removal lasers at any other medical practice besides The Company within a 20-mile radius of any Company location.
(2) The Employee is prohibited from having an ownership interest, investing in, or providing services to, directly or indirectly, in or to any medical practice within a 20-mile (10-Mile in NY city) radius that competes against or provides similar services to any Company location.
The Complaint continues the assault on noncompetes
It is not surprising that the complaint was filed. NLRB General Counsel Jennifer Abruzzo has shown a pattern of aggressively pursuing issues she views as high priority.
In May 2023, she issued a memo setting forth her view that the proffer, maintenance, and enforcement of noncompete provisions in employment contracts and severance agreements violate the Act except in limited circumstances.
In some cases, for example, noncompete agreements could be lawful if the provisions clearly restrict only individuals’ managerial or ownership interests in a competing business, concern independent-contractor relationships, or there are circumstances in which a narrowly tailored noncompete agreement’s infringement on employee rights may be justified by special circumstances.
The complaint against the med spa is another example of the federal government’s attack on noncompetes. Most of the focus has been on noncompetes that impact low-wage or middle wage workers. Interestingly, the complaint states that some of the individuals subjected to the noncompetes were supervisors under the Act.
Conclusion
Given the complaint and the Federal Trade Commission’s desire to ban noncompetes, employers should carefully audit/review noncompetes and other restrictive covenants that may limit employees’ rights to engage in protected activity under Section 7 of the NLRA. These proactive measures could help prevent a noncompete lawsuit.
As always, please let me know if I can help.
Kenneth Winkler, a shareholder at Berman Fink Van Horn, helps employers navigate the employment laws and regulations that govern the workplace.
