National Labor Relations Board (NLRB) General Counsel Jennifer Abruzzo issued a memo to all field offices, expanding on her May 2023 memo stating her position that overbroad non-compete agreements are unlawful because they chill employees from exercising their rights under Section 7 of the National Labor Relations Act. In today’s memo, Abruzzo laid out her intent to not only prosecute employers who require that their employees sign non-compete and “stay-or-pay” provisions, but to, as fully as possible, remedy the harmful monetary effects employees experience as a result of these provisions. The memo outlines her proposed framework for assessing the lawfulness of a range of “stay-or-pay” provisions, including training repayment agreement provisions (sometimes referred to as TRAPs), educational repayment contracts, quit fees, damages clauses, sign-on bonuses or other types of cash payments tied to a mandatory stay period, and other contracts under which employees must pay their employer in the event that they voluntarily or involuntarily separate from employment. The memo also outlines the circumstances under which employers can cure preexisting stay-or-pay arrangements to avoid prosecution.
