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Recent Settlements By FTC Reflect Some Of Its Reasoning Behind Proposed Ban on Non-Competes

During the first week of January 2023, the Federal Trade Commission (FTC) announced its legal action against three companies to force them to drop non-compete restrictions on thousands of workers. The companies identified in the FTC's complaints were Prudential Security, Inc. and Prudential Command, Inc. (collectively "Prudential") in Michigan as well as Ohio's O-I Glass, Inc. and Ardagh Group S.A., two of the largest glass food and beverage containers in the U.S.

Prudential required low-wage security guards to sign contracts that precluded them from working at a competing business within a 100-mile radius of their job for two years. Even though these guards earned minimum wage, they had to pay as much as $100,000 as a penalty for violating the non-compete clause. After a Michigan court told Prudential that their non-compete clauses were unreasonable and unenforceable, the company continued to use them. As part of its agreement with the FTC, Prudential must notify workers that they are no longer bound by the non-compete clauses and has agreed not to use them in the future. 

Similarly, the two glass container companies must also notify their workers that they are no longer bound by the non-competes and inform new employees that they may work for rival businesses. According to the FTC, O-I Glass used non-compete restrictions for employees in a variety of positions that limited post-employment prospects for up to a year. Ardagh restricted workers for two years at any businesses in the U.S., Canada, and Mexico. According to the FTC, these companies "locked up highly specialized workers" and prevented others from starting competing businesses in a very concentrated industry.

 

As widely reported, the FTC has proposed a wholesale ban on non-compete provisions between businesses and workers.