The Federal Trade Commission has taken action for the second time in a month to put an end to the use of noncompete agreements for lower-level employees. Prudential Security and Prudential Command, based in Michigan, were found to be using noncompetes to restrict their security guards and other employees from working for competitors or starting their own businesses. The FTC argued that the companies could have used less restrictive measures, such as confidentiality agreements, to protect their trade secrets. The move is part of a growing trend to limit the use of noncompete agreements for non-executive staff, with several states already implementing bans on the practice.
In a positive move for workers, the Federal Trade Commission (FTC) has recently reached agreements with companies to terminate the use of noncompete agreements for lower-level employees. This marks the second time in a month that the FTC has taken this step, following the agreements made with two of the largest glass companies in the US.
The companies in question this time are Prudential Security and Prudential Command, both affiliated companies based in Taylor, Michigan. These companies had been using noncompetes to prevent security guards and other employees from joining competitors or starting their own security businesses. However, the FTC found that less restrictive measures could have been taken to prevent the loss of trade secrets if that was their concern.
By requiring their employees, many of whom were security guards earning at or near minimum wage, to sign noncompetes, the companies were using their disproportionate bargaining power to make it difficult for workers to leave for better pay or improved working conditions. The FTC found that thousands of employees had been unfairly restricted by the agreements over several years. Moreover, employees and former employees that violated the noncompetes faced significant penalties, with fines reaching as much as $100,000.
The FTC order will benefit mainly those employees who left the companies before they were acquired by another company last year, and who are still subject to the noncompetes despite the change in ownership.
“Approximately 1,500 of [Prudential companies’] former employees are still subject to noncompete agreements,” the FTC said. “
These agreements enable respondents to attempt to block former employees from working for any other security guard company for two years.”
The FTC order requires the companies to keep records and report on their compliance efforts for a number of years to help the agency ensure that the ban on noncompetes is being honored. However, in agreeing to the terms of the order, the companies are not admitting they violated unfair practices laws under Section 5 of the Federal Trade Commission Act.
Noncompete agreements have been a contentious issue for many years, with critics arguing that they unfairly restrict workers’ ability to move to better jobs and stifle innovation. The FTC’s recent actions are a step in the right direction towards ensuring that companies do not use their power to curtail the opportunities available to workers.