Federal Trade Commission ruling prevents security companies from using “non-compete agreements”
Michigan March 20, 2023
Federal Trade Commission finalized a consent order against Prudential Security Inc. and Prudential Command Inc. and their owners violated the FTC Act through the unfair use of post-employment covenants not to compete, commonly referred to as “non-compete agreements.”
These non-compete agreements were part of the employment process and mainly were used for entry level, hourly employees and frontline supervisors who were being low salaries.
According to the complaint, the two affiliated security guard companies leveraged an unequal bargaining power between Prudential Security and its employees to impose onerous non-compete agreements on its workers, many of whom were low-wage security guards.
The FTC claims that these agreements reduced employee job mobility, curtailed competition, and deprived workers of higher wages and more favorable working conditions.
Prudential Security allegedly used the non-compete agreements to prevent employees from pursuing alternative job opportunities with higher pay.
Under the terms of the consent order, Prudential Security is enjoined from entering into future non-compete agreements or enforcing them against any employees. It must also inform any past or current employees subject to a non-compete agreement of the settlement, and must meet certain compliance obligations and reporting requirements.
