On February 14, 2025, newly appointed National Labor Relations Board (NLRB) Acting General Counsel William B. Cowen issued a memo rescinding numerous memos issued by former NLRB General Counsel Jennifer Abruzzo, citing an unsustainable backlog of cases. Among the 31 rescinded memos – some of which are rescinded outright and others “rescinded pending further review” – are: GC 23-02 on electronic monitoring; GC 23-05 on severance agreements; GC 23-08 and GC 25-01 on non-compete agreements and “stay-or-pay” provisions; and GC 21-06 and GC 21-07 addressing remedies to be sought. Read on to learn more about these memos and what their rescission means for your organization.
Rescinded: Electronic Monitoring (GC 23-02)
On October 31, 2022, Abruzzo issued GC 23-02 (Electronic Monitoring and Algorithmic Management of Employees Interfering with the Exercise of Section 7 Rights), which addressed the concern of omnipresent surveillance and other algorithmic-management tools that track workers’ activities, conversations, or movements. Abruzzo warned that such tools have the potential to interfere with the exercise of Section 7 rights by “significantly impairing or negating employees’ ability to engage in protected activity[.]”
Abruzzo urged the Board to find that employers presumptively violated the National Labor Relations Act (NLRA) through their surveillance and management practices. In cases where the employer rebuts this presumption by showing that its practices are narrowly tailored to address a legitimate business need, Abruzzo urged the Board to balance the respective interests of the employer and the employees to determine whether the Act permits such practices.
Rescinded: Severance Agreements (GC 23-05)
On February 21, 2023, the Board issued McLaren Macomb, holding that employers violate the NLRA by offering a severance agreement that conditions receipt of severance benefits on broad confidentiality and non-disparagement provisions because such provisions have a tendency to interfere with or restrain the prospective exercise of Section 7 rights (see HERE). On March 22, 2023, Abruzzo issued GC 23-05 (Guidance in Response to Inquiries about the McLaren Macomb Decision), which clarified the permissible scope of confidentiality and non-disparagement provisions under the Board’s McLaren Macomb decision (see HERE).
Rescinded: Non-Compete and “Stay-or-Pay” Provisions (GC 23-08 and GC 25-01)
On May 30, 2023, Abruzzo issued GC 23-08 (Non-Compete Agreements that Violate the National Labor Relations Act), which declared that employers offering, maintaining, or enforcing overly broad non-compete provisions violate the NLRA if the provision “reasonably tends to chill employees in the exercise of Section 7 rights unless it is narrowly tailored to address special circumstances justifying the infringement on employee rights” (see HERE). Abruzzo clarified that such provisions are overbroad when it could reasonably be construed by employees to deny them the ability to quit or change jobs by restricting access to other employment opportunities.
Abruzzo further stated that an employer’s justification is unlikely to be considered reasonable when such provisions are imposed on low- or middle-wage workers without access to protectible interests. In conclusion, Abruzzo called upon Board Regions to submit cases involving arguably unlawful non-competes, seek make-whole relief for affected employees, and seek and present evidence at trial regarding the impact and adverse consequences of overbroad non-compete agreements.
Relatedly, on October 7, 2024, Abruzzo issued GC 25-01 (Remedying the Harmful Effects of Non-Compete and “Stay-or-Pay” Provisions that Violate the National Labor Relations Act), which set forth the framework to assess the lawfulness of non-compete and “stay-or-pay” provisions, and remedies to be sought for unlawful provisions. GC 25-01 identifies several forms of “stay-or-pay” provisions, including training repayment agreement provisions, educational repayment contracts, quit fees, damages clauses, sign-on bonuses, or cash payments tied to a mandatory stay period. Abruzzo opined that such provisions violate the NLRA unless they are “narrowly tailored to minimize any interference with Section 7 rights.” Abruzzo concluded by stating her intent to prosecute unlawful preexisting stay-or-pay arrangements and seek retroactive application, absent extenuating circumstances.
Rescinded Pending Further Review: Seeking Full Remedies (GC 21-06 and GC 21-07)
Pending further guidance, AGC Cowen also rescinded GC 21-06 (Seeking Full Remedies) and GC 21-07 (Full Remedies in Settlement Agreements), which respectively addressed the NLRB’s prior shift toward expanding remedies in general and for settlements of pending charges before the Board.
Employer Takeaways
While employers may be tempted to revert back to previous policies and agreements, they should exercise caution when doing so. The Board currently lacks the quorum required to adopt new standards – therefore, notwithstanding the rescission of memoranda referenced above, the Board’s recent case decisions remain the law (for now). Additionally, AGC Cowen indicated that further adjustments will be made based on an ongoing review of practices. In the meantime, employers should:
- Monitor for updates from the NLRB, including a forthcoming memo to provide guidance on Board decisions that may be entered and/or overturned;
- Tailor agreements and policies to protect the employer’s legitimate business interests;
- Explore alternatives to non-compete agreements that may accomplish the employer’s goal of protecting legitimate business interests; and
- Continue to comply with more protective and/or restrictive state and local laws when implementing changes to policies, practices, and/or agreements.
If you have any questions related to the rescinded memos or the potential impact on your workplace, please reach out to the NFC Attorney with whom you typically work or call us at 973.665.9100 or 619.292.0515.
