As you may recall, back in January, we noted that the FTC had issued proposed consent orders in three enforcement actions against companies using noncompetes in ways that the FTC determined were improper.
One of the enforcement actions was brought against Prudential Security, Inc., Prudential Command Inc., Greg Wier, and Matthew Keywell (collectively, “Prudential”).
The key allegations in the complaint against Prudential were as follows:
- Prudential used noncompetes for security guards, who “made up the vast majority of [Prudential’s] workforce.”
- The noncompetes had a 100-mile radius and a $100,000 penalty for a violation.
- The security guards “typically earned hourly wages at or only slightly above minimum wage,” were not permitted to negotiate the noncompete, and were not offered “any additional compensation in exchange for signing Non-Compete Agreements.”
- Prudential routinely threatened enforcement of their agreements and “repeatedly brought lawsuits against both individual employees and competing security guard companies to enforce their Non-Compete Agreements.”
- Prudential “contacted competing security guard companies to ask the competing companies to refrain from hiring [Prudential’s] security guard employees because the employees had signed Non-Compete Agreements . . . .”
- At least one court had found the agreements to be unreasonable and unenforceable, but Prudential continued to required their security guards to sign them.
- “Any possible legitimate objectives of [Prudential’s] conduct . . . could have been achieved through significantly less restrictive means, including, for example, by entering confidentiality agreements that prohibited disclosure of any confidential information.”
After the FTC announced the proposed content order, there was a 30-day public comment period, which expired last month.
Today, the FTC announced the final order.
You can fully expect that more enforcement actions have been commenced already, and more will be coming. Please make sure that you are not engaging in behavior that is likely to elicit another!
We’ll keep you posted.
*A huge thank you to Erika Hahn for helping me keep track of the FTC’s noncompete-related activities, and for noting this development today.