The National Labor Relations Board is stepping up its scrutiny of employment agreements, targeting both “stay-or-pay” provisions and non-compete clauses.

NLRB General Counsel Jennifer Abruzzo issued a memo (GC Memo 25-01) outlining her view that these provisions often violate the National Labor Relations Act by hindering employee mobility. Abruzzo is also calling for additional remedies for employees affected by unlawful noncompetes.

‘Stay-or-pay’ provisions under fire

“Stay-or-pay” provisions require employees to reimburse their employer for certain expenses if they leave their job within a specified timeframe. Common examples include repayment agreements for training costs, sign-on bonuses, or relocation expenses. Abruzzo argues these provisions create financial barriers for employees seeking better opportunities.

The memo proposes a framework for evaluating the legality of stay-or-pay clauses. Such provisions are presumptively unlawful unless the employer can demonstrate they meet specific criteria, including a voluntary agreement, a reasonable repayment amount tied to the actual cost of the benefit, a justifiable time period, and an exemption from repayment if the employee is terminated without cause.

Employers have a limited window until December 6, 2024, to revise existing stay-or-pay agreements to comply with this framework. Agreements created after October 7, 2024, are subject to immediate scrutiny.

Expanded remedies for noncompetes

Further strengthening her stance against restrictive covenants, Abruzzo is also seeking expanded remedies for unlawful noncompete agreements.

Beyond simply declaring a noncompete unenforceable, the NLRB may require employers to compensate affected employees for lost wages, benefits, and other damages resulting from the restriction.

That includes compensating former employees who may have accepted lower-paying jobs or incurred relocation or retraining expenses due to a noncompete.

What this means for employers

While GC memos are not legally binding, they offer insight into the NLRB’s enforcement priorities and foreshadow potential board decisions. Employers should review their existing employment agreements, particularly those containing stay-or-pay or noncompete clauses.

That said, political analysts expect President-elect Donald Trump to replace Abruzzo, meaning future enforcement priorities remain uncertain. Employers should carefully evaluate the risk of inaction versus the cost of compliance.