Dive Brief:
- Two of the world’s largest glass container makers agreed to stop requiring their employees in the U.S. to sign non-compete agreements in recent settlements with the Federal Trade Commission.
- Luxembourg-based Ardagh Group, with $10 billion in revenue last year, and O-I Glass, with $7 billion in revenue — the industry’s largest and third-largest global players — agreed to stop requiring non-competes, after requiring hundreds of their workers to sign them over the past decade or so. Past non-competes will be withdrawn, too.
- The settlements are the latest signal from the federal government that it believes companies are using the prohibitions in contracts as tactics for restricting competition and keeping labor costs down as much as for protecting trade secrets.
Dive Insight:
The FTC in January proposed a regulatory ban on company non-competes on the grounds they stifle competition by keeping employees from using the expertise they’ve developed on a job from launching their own businesses or helping other companies compete against former employers.
Labor costs are artificially lowered, too, by preventing employees from taking their expertise to competitors for higher pay.
“Non-competes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand,” FTC Chair Lina Khan said in a statement announcing the proposed ban.
President Joe Biden, in his State of the Union speech in February, endorsed the ban.
The FTC’s proposal follows stepped-up efforts to curb company non-competes as violations of Section 5 of the Federal Trade Act, which takes aim at unfair business practices.
In the Ardagh and O-I complaints, the FTC alleges the companies could have taken other measures to protect their trade secrets.
“Any legitimate objectives … could have been achieved through significantly less restrictive means, including, for example, by entering confidentiality agreements that prohibit employees and former employees from disclosing company trade secrets and other confidential information,” the agency said.
As part of the settlements, the companies must give their employees notice that any non-compete they signed is no longer in effect and that they can apply to work with a competitor without restriction.
“You may seek or accept a job with any company or person — even if they compete with Ardagh,” the agreement with that company says. “You may run your own business — even if it competes with Ardagh. You may compete with Ardagh at any time after you leave Ardagh.”
Similar language is in the O-I agreement.
The settlement terms are in effect for 20 years. The companies must meet record-keeping and reporting requirements to show they’re complying with the terms.
