NLRB General Counsel Launches New Attack On “Stay-Or-Pay” Provisions And Continues Aggressive Pursuit Of Noncompetes 

On October 7, 2024, the General Counsel to the National Labor Relations Board (NLRB or Board) issued a memo to all NLRB field offices explaining her intention to prosecute employers who offer, maintain, or enforce “stay-or-pay” provisions. Last year, the General Counsel declared that the use of noncompete provisions in employment and severance contracts violates the National Labor Relations Act (NLRA). This year she takes the position that “stay-or-pay” provisions, such as training or educational repayment agreements, sign-on bonuses, or other types of cash payments tied to a “mandatory stay period,” also violate employees’ rights under the law. 

In Memorandum GC 25-01, the Board’s chief prosecutor lays out her argument that “stay-or-pay” provisions – any provision requiring an employee to pay their employer if they separate from employment – are unlawful. She contends: “Like non-compete agreements, stay-or-pay provisions both restrict employee mobility, by making resigning from employment financially difficult or untenable, and increase employee fear of termination for engaging in activity protected by the Act. Accordingly, I believe that such provisions violate Section 8(a)(1) of the Act unless they are narrowly tailored to minimize any interference with Section 7 rights.” The General Counsel urges the Board to find such provisions presumptively unlawful and details the very narrow circumstances in which such provisions could be lawful. 

Like with noncompetes, the General Counsel takes the position that “the proffer, maintenance, or enforcement of any . . . stay-or-pay arrangement” violates the law.  She has granted employers a 60-day window from October 7 to cure any pre-existing stay-or-pay provisions and stop any enforcement actions. After that time, she intends to prosecute employers for offering or using these types of provisions and for the maintenance or enforcement of any pre-existing contracts. 

The General Counsel also addresses how the Board should remedy unlawful noncompete provisions. Requiring the rescission of the noncompete is not enough, in her opinion. Instead, the Board should require the employer to compensate employees and former employees for the harm caused by the noncompete. The General Counsel believes that the Board should allow an employee to show that they were deprived of a better job opportunity as a result of the noncompete provision and award the difference in terms of pay and benefits between those jobs. Former employees should also be able to show damages they sustained by complying with a noncompete, such as lost or lower wages, moving expenses to relocate to another area, or retraining efforts. These types of remedies should be available to all employees with noncompete restrictions, even those who voluntarily resigned or were lawfully terminated.  

The General Counsel cannot make new law, but she does decide what to prosecute and bring before the Board for a trial. As such, her declarations and intentions are very relevant to all employers because they dictate how the NLRB field offices will analyze and investigate charges filed by employees. 

If you have noncompete or “stay-or-pay” agreements with your employees (as opposed to your supervisors), it is wise to consult with counsel about this new threat from the Board. The attorneys of KZA can help you assess the risk for your business and make decisions as to whether these agreements can be revised or should be eliminated.

KZA Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.