Dive Brief:

• For the second time in a month, the Federal Trade Commission has entered into agreements with companies to end their use of noncompete agreements for mainly lower-level employees. 
• Prudential Security and Prudential Command, affiliated companies based in Taylor, Michigan, were using noncompetes to prevent security guards and other employees from joining competitors or starting their own security businesses.
• The FTC said the companies could have used less restrictive ways to prevent the loss of trade secrets if that was their concern. “Any possible legitimate objectives of respondents’ conduct as alleged herein could have been achieved through significantly less restrictive means, including, for example, by entering confidentiality agreements that prohibited disclosure of any confidential information,” the FTC said in its complaint.

Dive Insight:

By requiring their employees, most of them security guards earning at or near minimum wage, to sign noncompetes, the companies were leveraging their disproportionate bargaining power to make it hard for workers to leave for better pay or improved working conditions, the FTC said. 

Thousands of employees were unfairly restricted by the agreements over several years, according to the agency. 

Employees and former employees that violated the noncompetes faced significant penalties, as much as $100,000. 

The companies were acquired by another company last year, which lifted the noncompetes for employees who were working for the companies at the time of the transaction and stayed on under the new ownership. 

The FTC order will mainly benefit employees who left the companies before the acquisition and are still subject to the noncompetes despite the change in ownership. 

“Approximately 1,500 of [Prudential companies’] former employees are still subject to non-compete 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 the ban on noncompetes is being honored. In agreeing to the terms of the order, the companies aren’t admitting they violated unfair practices laws under Section 5 of the Federal Trade Commission Act. 

The FTC three weeks ago entered into similar agreements with two of the largest glass companies in the United States to stop requiring their employees to sign noncompetes.