The Federal Trade Commission has begun its crackdown on noncompete agreements, the agency announced Jan. 4 — in the same week it proposed a rule that would ban noncompetes entirely.
The FTC filed complaints against three companies and two individuals, alleging that each “imposed noncompete restrictions on workers in positions ranging from low-wage security guards to manufacturing workers to engineers that barred them from seeking or accepting work with another employer or operating a competing business after they left the companies.”
One complaint focused on Prudential Security, Inc. and Prudential Command Inc., claiming that the companies “exploited their superior bargaining power” against security guards, who typically earned hourly wages, often at the minimum wage. Breaking the noncompete clause by working for a competing business within 100 miles of the Prudential jobsite, however, required employees to pay $100,000 in penalty, FTC said.
Prudential would allegedly attempt to enforce its noncompete restrictions by suing individuals and blocking those individual employees from accepting job offers that often included “significantly higher wages,” according to FTC. The companies maintained the restrictions even after a Michigan state court declared the noncompetes unenforceable under state law, FTC alleged.
The owners of the companies — Greg Wier and Matthew Keywell — were also named in the complaints.
The other complaints were filed against two glass container manufacturers: O-I Glass, Inc. and Ardagh Group S.A. Both companies allegedly restricted employees from accepting jobs in the industry anywhere in the U.S. for one or two years after leaving the respective companies.
Notably, the glass manufacturing industry is “highly concentrated,” FTC said, and it is noticeably difficult for competitors to enter the market due in part to the struggle to find talent for those specific skills.
All of the proposed consent agreements from the FTC prohibit named parties from enforcing or imposing noncompetes against any relevant employees, require them to void the noncompetes without penalizing affected workers and require them to, for the next 10 years, “provide a clear and conspicuous notice to any new relevant employees that they may freely seek or accept a job with any company or person, run their own business, or compete with them at any time following their employment.”
Antitrust concerns, of which noncompetes are a part, are increasingly an HR issue, an attorney previously told HR Dive. Noncompetes, in particular, have faced scrutiny for some time. In attempting to ban them, FTC said that it could increase employee earnings by hundreds of billions a year and free up worker mobility in a complicated market.
Employer-side attorneys, however, told HR Dive that the proposed rule may be considered overbroad, and leaves many questions unanswered.
Wednesday’s complaints mark the first time FTC has sued to block noncompete restrictions, it said, although the U.S. Department of Justice has been engaging in broader antitrust enforcement actions for some time. FTC and DOJ in 2016 issued a joint guidance on antitrust law for HR pros and the Justice Department in recent years has targeted no-poach agreements, even bringing criminal charges against individuals involved.
