Non-compete and contractor policies set to change in Trump's NLRB

At a glance

• The National Labor Relations Board (NLRB) is highly susceptible to changes in party control, with significant shifts expected under the second Trump administration.
• Employers anticipate relief from the increased scrutiny and enforcement seen under the Biden-era NLRB.
• The incoming administration is likely to reverse or halt actions taken by the Biden-era NLRB, particularly those seen as regulatory overreach.
• Trump’s NLRB is expected to reinstate employer-friendly standards, including those related to independent contractors and severance agreements.
• The Trump administration may roll back pro-labor stances, including those on non-compete agreements, voluntary recognition, and quickie election rules.

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Originally posted on Bloomberg Law.

A change in party control generally impacts the workings of federal agencies, but the NLRB is particularly prone to partisan shifts. Given the aggressively pro-labor stance of the Biden-era NLRB, the pendulum swing in the second Trump administration is expected to be particularly dramatic.

These anticipated changes will be a relief for employers frustrated by the increased level of scrutiny and enforcement from the NLRB under the current administration.

Lawmakers in both parties, along with business groups, have widely criticized actions taken by the Biden-era NLRB and General Counsel Jennifer Abruzzo, such as decisions and enforcement targeting severance agreements and non-competes, as regulatory overreach outside the scope of the National Labor Relations Act (NLRA). The incoming administration will likely reverse or not pursue these actions.

The NLRB under President-elect Donald Trump is expected to reinstate precedent from his first administration that was reversed by the Biden-era NLRB, such as a more employer-friendly independent contractor standard.

Employers could see a reversal or abandonment of the pro-labor stances taken by current NLRB leadership in the following areas.

Noncompete and stay-or-pay agreements

Abruzzo joined in the Biden administration’s 'whole of government' approach to promoting worker mobility, issuing a memo asserting her view that noncompete agreements chill employee rights under the NLRA, and urging the NLRB to adopt a new standard that would render most non-competes unlawful.

She went a step further and announced her intent to hold employers liable for any financial harm suffered by employees required to sign such agreements, including the 'stay or pay' agreements. These plans—seen by many as an unprecedented interpretation of the NLRA—are unlikely to continue under Trump.

A new acting general counsel appointed by Trump would most likely rescind the memo. Similarly, any pending NLRB litigation based on Abruzzo’s theory will potentially be stopped in its tracks or withdrawn.

Severance agreements

In the 2023 decision in McLaren Macomb, the NLRB overruled prior precedent and held that confidentiality and non-disparagement provisions in severance agreements— even absent any indicia of coercion—are per se unlawful if the terms could possibly be construed as interfering with or restraining employees in the exercise of their section 7 rights. Under Trump, the board is expected to reinstate the previous standard that such provisions, in and of themselves, are not unlawful.

Independent contractors

The Biden administration reversed the Trump-era independent contractor rule and adopted a more employee-friendly standard to determine whether an individual is an 'employee' under the NLRA or an independent contractor outside of the act’s protections in an effort to sweep as many workers as possible within the NLRA’s scope.

Under Trump, the NLRB may revert to its earlier standard that relied on the presence or absence of entrepreneurial opportunity for gain or loss as the 'animating principle' of the analysis.

Voluntary recognition

The NLRB will likely be less friendly to union organizing methods outside of the traditional secret ballot election context and target decisions and rules it views as infringing on employee free choice. These include 'quickie' election rules, which shortened deadlines for hearings and elections, and decisions limiting opportunities for employer messaging on unionization, such as the recent ruling restricting the use of mandatory or captive audience employer meetings.

The Trump NLRB is also expected to roll back current agency efforts to advance the use of voluntary recognition, including its controversial decision in Cemex Construction Materials Pacific, which drastically changed how workers may become represented by unions. The next Trump administration may also revive attempts to curb the use of framework and neutrality agreements as a method of union organizing.

The Biden administration went to great lengths to advance a broad, pro-labor agenda.

The second Trump administration may immediately begin to unwind these actions, starting with the potential appointment of a new, pro-employer general counsel who will redirect the priorities of the agency, and ultimately gain partisan control of the board itself, which, due to staggered terms, may not take place until 2026.

Either way, we expect the Trump administration will hit the proverbial reset button and quickly attempt to flip the agency back to its pro-employer, conservative policies.