FTC cracks down on companies imposing harmful restrictions on thousands of workers (2023)

The Federal Trade Commission took legal action against three companies and two individuals, forcing them to lift the non-compete clauses they had imposed on thousands of workers. These actions build on the FTC's extensive experience in this area and mark the first time the agency has acted to stop illegal restrictions on competition.

According to complaints issued by the FTC, each of the companies and individuals illegally placed restrictions on workers in positions ranging from low-paid security guards to manufacturing workers and engineers that prohibited them from seeking or accepting work from another employer or competitor. to operate businesses. after leaving the companies.

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"These cases show how non-compete clauses can prevent workers from earning higher wages and can prevent companies from competing," said Chairman Lina M. Khan. "I am grateful to our talented employees for their efforts to vigorously enforce employment protection and fair competition laws."

"The FTC is committed to ensuring that workers have the freedom to demand higher wages and better working conditions without unfair restrictions by employers," said Rahul Rao, deputy director of the FTC's Office of Competition. "The FTC will continue to investigate and, as appropriate, challenge non-compete clauses and other restrictive contract terms that hurt workers and competition."

Non-compete clauses harm both employees and competing companies. For workers, non-compete clauses result in lower wages and salaries, fewer benefits, and less favorable working conditions. For companies, these restrictions prevent the entry of competitors and the development of their business. The FTC recently issueda statement that restored agency policyConsistently apply the prohibition of unfair competition methods in Section 5.

In its complaints, the FTC said the restrictions constituted an unfair practice under Section 5 of the FTC statute. In each case, the FTC ordered the companies to stop applying, threatening to apply or imposing restrictions on the affected workers. They are also required to inform all affected employees that they are no longer subject to the non-compete clause.

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The companies named in the FTC complaints are:

Prudential Security, Inc. y Prudential Command Inc.In its lawsuit, the FTC said the two related Michigan-based companies and their owners, Greg Wier and Matthew Keywell, used their superior bargaining power over the low-paid security guards and required them to sign contracts that included restrictions that they were forbidden to do it. He worked for a competing company within 100 miles of his Prudential job for two years after leaving Prudential.

Prudential security guards typically earned hourly wages at or near minimum wage, but the company's standard no-compete clause included an additional restriction that required employees to pay a $100,000 fine for alleged violations of the pay clause. the FTC noted.

According to the FTC, Prudential attempted to enforce its non-compete clause by suing individual employees and competing security companies and, in some cases, preventing workers from accepting significantly higher-paying jobs. Even after a Michigan state court ruled that Prudential's non-compete agreements were unreasonable and unenforceable under state law, the companies continued to require all of their security guards to sign them.

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In August 2022, Prudential sold most of its business to another security company. The prudential security guards who now work for the acquiring company are not subject to any competition restrictions with the company, according to the FTC's complaint. But about 1,500 former Prudential employees were still bound by the non-compete clause.

Under the Prudential Order,Businesses and their individual owners are prohibited from enforcing, threatening to enforce, or imposing any non-compete obligation on any current or former employee and are prohibited from imposing any non-compete obligation in any of their other business endeavors, including any future business risk . They are also required to inform all affected employees that they are no longer subject to the non-compete clause.

Manufacturers of glass containers:

The FTC has also filed lawsuits against the two largest manufacturers of glass food and beverage containers in the United States, O-I Glass, Inc. and Ardagh Group S.A. According to the agency, the glass food and beverage container industry is highly concentrated in the United States. In addition, it is difficult for new entrants to enter the market, in part due to the need to find and hire experienced and qualified glass container manufacturers. In the complaints, the FTC concluded that the use of non-compete obligations by companies is likely to discourage the entry and expansion of competitors.

O-I Glass, Inc.According to the FTC, it has been based in Ohio for more than a decade.Non-competition clauses imposed on companiesemployees in different positions. These restrictions generally prohibited workers from working for, owning, or having an interest in a United States business, without the prior written consent of O-I Glass, for one year after leaving O-I Glass products and/or services sold.

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At the start of the Commission's investigation, more than 1,000 O-I Glass employees were subject to such restrictions, including employees who work in the glassworks' furnaces and forming lines and in other roles in production, engineering and glass quality control.

Ardagh Group S.A.In its lawsuit, the FTC said that Ardagh and two of its affiliates in the United States, which make glass food and beverage containers, placed restrictions on employees at various positions. The restrictions prohibited workers, typically for two years after leaving Ardagh, from directly or indirectly providing "the same or substantially similar services" as those provided by the worker in Ardagh to a company in the United States, Canada or Mexico. that "is involved". . or assisting in the sale, design, development, manufacture or production of glass containers in competition with Ardagh.

At the start of the Commission's investigation, Ardagh had non-compete obligations to more than 700 current US employees, including employees working on factory furnaces and forming lines and in other roles in glass production, engineering and quality control. .

FTC Ordered Remedy:On the other hand, ordersregulator,O-I-vidriomiArdaghAI prohibit companies and, where applicable, their individual owners from enforcing, threatening to enforce, or imposing non-compete obligations on relevant employees. Also the commands:

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  • prohibit them from telling any relevant employee or other employer that the employee is subject to a non-compete obligation;
  • require them to lift and annul the challenged non-competition clauses without penalizing the affected workers;
  • require them to provide copies of the order to current and former employees who were the subject of the contested non-compete clause;
  • require them to provide a copy of the complaint and order to current and prospective directors, officers, and employees of companies responsible for hiring and recruiting; AND
  • require that, for the next 10 years, they clearly communicate to all relevant new employees that they are free to seek or accept a position with any company or person, run their own business, or compete with them at any time for employment.

The FTC has built its expertise in restricting competition through years of policy analysis and public engagement, including2020 an agency workshop that addresses the topic. The Commission also challenged far-reaching non-compete obligations in connection with several mergers examined by the agency.

The agency continues to investigate restrictions on competition and other restrictive clauses in employment contracts that may violate the law. If you are aware of an unfair restriction of competition,you can report itto FTC staff.

The commission voted 3-1 to file the administrative appeal and accept the consent agreement, with Commissioner Christine S. Wilson voting against.President Lina M. Khan and Commissioners Rebecca Kelly Slaughter and Alvaro Bedoya issued a statement. commissioner wilsonissued a statement on the Prudential affairand notO-I Glass and Ardagh are important. The FTC will soon publish descriptions of the Consent Agreement Packages in the Federal Register. There will be public comment on the settlements, after which the Commission will decide whether the proposed consent orders become final. Instructions for submitting comments will appear on posted notices. Comments must be received in the Federal Register within 30 days of publication. After processing, comments will be posted on Regulations.gov.


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