Dive Brief:

• Planned Building Services and its affiliates and Guardian Service Industries, in separate agreements with the Federal Trade Commission, have agreed to stop enforcing no-hire agreements they require of the building owners who contract with them to provide building services.
• The agreements “have unfairly restrained low wage workers from seeking higher pay, better benefits, and new job opportunities,” Henry Liu, director of the FTC’s competition bureau, said when announcing the deal with Planned Building Services.
• The actions come as the agency’s effort to stop no-hires and other types of noncompetes through a nationwide ban remains stymied by a federal court injunction.

Dive Insight:

The FTC has authority under Section 1 of the Sherman Act and Section 5 of the FTC Act to find no-hire agreements illegal if they’re anticompetitive. 

The agency last year tried to ban all types of noncompetes through a rule that was to take effect in September but was enjoined by a federal district court in Texas. The court said the rule exceeded the agency’s authority. Two other federal courts have split on whether the nationwide ban is legal. 

In the proposed consent order with Planned Building Services, the New Jersey-based company and its affiliates have agreed to stop enforcing their no-hire agreements and to notify their employees and their clients that the restrictions are no longer in effect. The companies provide concierge, custodial, maintenance and other services to residential and commercial building owners and employ about 3,000 people, mostly in New Jersey and New York.

The agreements prevented building owners that contracted with the company and its affiliates from hiring away their employees or working with other contractors that hire away their employees, unless the employees quit first and wait six months to be hired. Building owners that violate the agreement pay a penalty that’s equivalent to three months of the former employee’s wages. 

In its complaint, the FTC said the agreements “limited workers’ ability to negotiate for higher wages, better benefits, and improved working conditions.” 

The proposed consent order with Guardian is similar. The New York-based company also provides custodial, security and other services to building owners and imposes similar restrictions on clients hiring away its employees. 

“Guardian, operating as a middleman, has restricted building owners and competitors from hiring workers while also forcing mostly low wage employees to accept unfair employment terms that restrain job mobility, wage growth, and their economic freedom,” said the FTC’s Liu when the deal was announced. 

The FTC commissioners voted unanimously to file the complaint against Planned Business Services and approve the settlement but split on a partisan basis on the Guardian complaint and settlement. The agency’s two Republican-appointed commissioners, including Andrew Ferguson, who President-elect Donald Trump has announced as his FTC chair pick, said the agency failed to present evidence that Guardian’s use of the agreements were anticompetitive.

“I am at a loss about how my colleagues have formed their reason to believe that Guardian is violating the antitrust laws,” said Ferguson in his dissent. 

Unlike its investigation into Guardian, the FTC’s investigation into Planned Business Services included sufficient evidence for the commissioners on a reason-to-believe basis that the anticompetitive effect of the agreements outweighed any procompetitive reasons the company had for requiring them.  

“Notwithstanding the bare-bones allegations in the Complaint, I have ‘reason to believe’ that Planned’s no-hire provisions violate Section 1 of the Sherman Act,” Ferguson said, with the concurrence of the other Republican commissioner, Melissa Holyoak.

In this and other contexts, Ferguson has said he supports the FTC going after anticompetitive practices on a company-by-company basis, but he opposes the blanket approach the agency is trying to take with its noncompete ban. 

“I have always valued protecting workers from violations of the law,” he said in his concurring statement on the deal with Planned Business Services. “But I vote only for Commission action that is fully consistent with the laws Congress wrote…. The non-compete clause rule is enjoined nationwide and has not protected a single worker. Investigating, proving, and punishing actual violations of the law protects workers. Failed rules and press releases do not.”

The two settlements must be approved by a court.