New England Biz Law Update
A National Labor Relations Board judge has ruled that while a wheelchair manufacturer can keep most of its restrictive employment agreement intact, including noncompete provisions, it must rescind clauses that ban workers from discussing the agreement’s terms or disparaging the company.
In the decision, Administrative Law Judge Robert Giannasi found that Permobil Inc.’s confidentiality and non-disparagement provisions were overly broad and violated workers’ rights under federal labor law. However, he rejected challenges to the agreement’s core noncompete and non-solicitation requirements.
The case arose after Mark Westphal, who worked on Permobil’s secret “Project Greenfield” initiative to develop a new wheelchair product line, left to join competitor Sunrise Medical in May 2023. Permobil sued Westphal in federal court for allegedly violating his employment agreement.
Giannasi ruled that while Permobil can’t prohibit employees from discussing the agreement’s terms or criticizing the company when engaging in protected labor activities, its restrictions on working for competitors and recruiting other employees are legal given the legitimate business need to protect trade secrets.
A “reasonable employee would understand that the language of the provision protects the Respondent’s secrets, particularly those in its Greenleaf Project, whose employees were the only ones who were required to sign the Employment Agreement,” Giannasi wrote. “Any Section 7 rights affected by employees agreeing not to be employed by a competitor is remote and, in any event, overridden by the language spelling out the business reasons for the ban.”
The judge ordered Permobil to post notices informing employees that they cannot be barred from discussing the employment agreement or disparaging the company when exercising their rights under federal labor law.
