A National Labor Relations Board (NLRB) administrative judge has ruled that IT services provider NTT Data’s noncompete agreement does not violate employees’ rights under federal labor law, marking a significant development in the ongoing debate over such agreements in the workplace.
In a decision delivered on Thursday, Administrative Law Judge G. Rebekah Ramirez, in Detroit, ruled that NTT Data’s noncompete agreements, which prohibit laid-off employees from competing with the company or poaching its clients or co-workers, are legal under federal law. This decision contrasts with a prior ruling in June, where another judge ruled that a similar agreement imposed by an HVAC company violated the National Labor Relations Act (NLRA), a decision now under review by the five-member NLRB.
The case highlights the growing scrutiny of noncompete agreements, which affect approximately 20% of U.S. workers, or around 30 million individuals, according to the U.S. Federal Trade Commission (FTC). In 2023, the FTC passed a rule banning noncompete agreements nationwide, but that rule was blocked by a federal judge in Texas in August, keeping the legal landscape in flux.
NTT Data, based in Tokyo with U.S. headquarters in Texas, required employees who were laid off to sign a severance agreement that restricted them from offering similar services to the company’s customers and from soliciting other employees for a period of one year after termination. These agreements also restricted them from encouraging clients to sever ties with NTT Data.
NLRB General Counsel Jennifer Abruzzo had previously argued that most noncompete agreements hinder workers’ rights to organize and advocate for improved working conditions. In her office’s complaint filed last year, Abruzzo argued that NTT Data’s agreement interfered with employees’ ability to engage in activities protected by the NLRA, such as organizing mass resignations or urging coworkers to join competitors.
Judge Ramirez, however, ruled that while the agreement prevents employees from targeting NTT’s clients, it does not fully restrict them from working for competitors. “I do not find that an employee could reasonably interpret this subsection as restricting them from discussing their terms of employment, engaging in concerted activities to improve their working conditions, or engaging in any other NLRA right,” Ramirez wrote.
However, the judge did find that NTT Data violated the NLRA in other respects, including requiring employees to sign confidentiality agreements that prohibited them from discussing their pay and working conditions, as well as releases that waived their rights to take legal action against the company.
The decision marks a pivotal moment in the ongoing discussion surrounding noncompete agreements and their impact on employee rights. While NTT Data’s noncompete clause has been upheld, the case will likely influence future labor rulings on employer-employee contract negotiations.
Read more:
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