After Building Service Workers Mobilize, FTC Stops Secret No-Hire Agreements

This article is a joint publication of Workday Magazine and The American Prospect.

Until now, Raymond Pearson, a 36-year-old concierge in Guttenberg, New Jersey, wasn’t able to sell his labor freely. In the roughly eight years he has worked at one of the Galaxy Towers, answering phones, providing customer service, “tending to the needs of residents, and protecting them at all costs,” as he puts it, he has been subject to an agreement between his building’s homeowners’ association (HOA) and his employer, Planned Companies. That deal, made without his knowledge in a contract he is not party to, blocked him from working directly for the building, or for another contractor at the building. As long as he wanted to remain with the residents he has spent years building relationships with, seeing their kids go off to college, learning about their travails and preferences, he was stuck with an employer who keeps him trapped in low wages.

That all changed when his union, 32BJ SEIU, fought back—and won a Federal Trade Commission order earlier this month for Planned to scrap such secret no-hire agreements, also known as restrictive covenants, an employer tool frequently wielded to keep contracted and subcontracted workers isolated and vulnerable. On January 6, Planned settled with FTC, the New York and New Jersey Attorneys General and the National Labor Relations Board, in what Pearson hopes sounds the death knell for this practice in his workplace.

Worker advocates say the outcomes, which follow FTC action against the no-hire agreements of building services contractor Guardian Service Industries, will not only directly impact more than 3,000 Planned employees, most of them low-wage building workers, but could also provide a useful precedent for eradicating restrictive covenants beyond Planned. Because such agreements are so secretive, it is not known how many workers are subject to them, but anecdotally they appear to be widespread among a strata of highly exploited, subcontracted laborers: child care, building maintenance, and sanitation workers.

Pearson is pleased with the victory, but still holds considerable resentment against his employer, a big player in the building services industry, “given I was unaware of what was going on.”

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A hallmark of the fissured workplace, outlined in a 2017 book of that name, is that workers do not directly work for the businesses they service, but for intermediaries. Janitors who clean big-box stores are not employed by those stores, but by contractors. Front-desk attendants are not employed by the condo where they work, but by a company that provides services for that condo. Amazon delivery drivers, in some cases, are not formal employees of Amazon, but of companies that contract with Amazon, even though they wear Amazon uniforms, drive Amazon-branded delivery trucks, use Amazon-issued technology, and have many facets of their work life dictated by Amazon. 

Such arrangements have historically helped giant companies avoid basic responsibilities like overtime and workers’ compensation, dodge criticisms over labor rights abuses, and prevent workers from banding together. And they allow endless webs of contractors and subcontractors to profit off of exploitation and union busting, though workers are increasingly pushing back). 

Restrictive covenants, like the one Pearson was subject to, are best described as more secretive versions of traditional noncompete clauses or no-hire agreements that limit the freedom of workers to leave their jobs in search of better pay and conditions. The one Pearson was laboring under said that Planned workers can’t work at the building for anyone except Planned—either directly for the HOA or for another contractor—unless the HOA wants to pay a penalty of three months’ worth of salary for each employee kept on. 

Because it’s cost prohibitive to pay this kind of sum, the clause effectively bars buildings or competing contractors from directly hiring workers. Temp agencies frequently use a close cousin of restrictive covenants: conversion fees, or money a company must pay to convert temp workers hired via an agency to direct employees.

32BJ SEIU says it only found out about this provision when it was invoked by a company called Adamas Building Services to justify its refusal to hire the unionized Planned workers when the company left the building. (The union took this case to the NLRB, and 15 workers were awarded more than a year’s worth of back pay in a subsequent ruling, though Adamas is now appealing, and the outcome will determine whether workers actually get this money.)

The discovery was violative on a gut level, Pearson says. “The majority of my time goes into being at work,” he explains. “By the time I get home, there is not enough time to live a normal life, because I just wasted time at work. I’m around their families more than I am my own family. If the property wants to get rid of Planned, why should I be ripped away?” 

“You have ups and downs, but at the end of the day, the residents trust you,” he adds. “They know what they are going to get from you when they walk through the door.” 

The FTC ruling came in response to a complaint, filed on behalf of 32BJ SEIU by Towards Justice, a non-profit law firm. It argued that secret no-hire agreements illustrate the “unfair methods of competition that employers use in the fissured workplace to undermine worker power.” When workers aren’t able to sell their labor as they wish, it undermines their ability to seek better conditions, and to organize. And it can also be devastating, especially where employees have formed close bonds with tenants, but then face restrictions staying at their building, the complaint argues. 

“It’s mostly about the use of this no-hire provision to undermine worker mobility, especially in a fissured workplace context, where you’re keeping people trapped in these jobs where they have low wages and poor working conditions,” says David Seligman, who filed the FTC complaint on behalf of SEIU 32BJ, and serves as the executive director of Towards Justice. “This is a violation of the antitrust laws to agree with competitors in the labor market not to compete for workers’s labor.”

The five commissioners determined that Planned’s no-hire agreements constitute per se violations of the Sherman Act, the main federal antitrust law, specifically Section 1, which bars price-fixing and agreements not to compete. The FTC determined they also violate Section 5 of the FTC Act, which bars unfair methods of competition and unfair and deceptive acts and practices.

“What the FTC says is that this kind of agreement is a classic agreement not to compete,” says Seligman.

The order came from all five commissioners of the FTC, though the Republicans, Melissa Holyoak and Andrew Ferguson, concurred for their own reasons, and disagreed that the no-hire agreements constitute per se violations of the Sherman Act. Even still, Seligman says, “It’s definitely a sign that even under Trump, the FTC will continue to look at no-hire agreements as potentially violating of antitrust law.”

The order is sweeping. The FTC said that Planned must stop enforcing these agreements, stop including them in contracts, and “notify customers that are currently subject to a no-hire agreement or that had been subject to a no-hire agreement” in the last three years. 

But for Seligman, the really exciting thing is what this could mean for the “potentially millions” of workers throughout the fissured economy who are laboring under similar arrangements. “Because they say it’s a per se violation it’s critical to be able to enforce these rights in a straightforward way,” he explains. “This is a powerful precedent that it doesn’t matter that these are low-wage workers, or a fissured workplace. Lots of states prohibit unfair methods of competition or unfair trade practices, and this decision is a really important blueprint for states for the application and interpretation of state law.”

Last April, the FTC issued a ruling to ban traditional noncompete agreements, drawing on the same source of law as the enforcement order it issued in response to the complaint about Planned. (That noncompete ban is currently being challenged in federal court.) And some states have already struck blows against restrictive covenants, with Minnesota passing a ban last summer. New Jersey won legislative protections in 2023, and it’s the position of 32BJ SEIU that Planned’s no-hire should not have been permitted under the law. But to enforce this, the union would have had to take Planned to court. “The FTC settlement streamlines getting rid of the restrictive covenants,” a spokesperson for the union told me.

According to Brent Garren, deputy general counsel for 32BJ SEIU, the cases against Planned had an impact before they were resolved on January 6. “Some months ago, under the pressure of these cases, Planned stopped putting the restrictive covenants in new contracts,” he explained. “And now with the settlements, they’re agreeing to tell every client that had a restrictive covenant that it’s coming out of their contracts and won’t be enforced, and telling workers they aren’t bound or restricted by covenant.”

Pearson says he has yet to see any of these developments improve his material conditions. Roughly six years into his tenure, he got a demotion when his position was eliminated, and he’s now making “$20 and change” per hour. The health insurance provided by the company is so expensive he has determined it is not worth it, and has determined “it’s cheaper to go outside of the company.”

Pearson lives in North Bergen, New Jersey. When I talked to him almost two years ago he was living on his own. Now, he says, “I don’t make enough, so I brought my sister and her kids in.” His nieces and nephews are 9, 12, and 14 years old.

In a policy statement this week, the FTC also clarified that all independent contractors, like gig workers, are allowed to engage in collective bargaining with their employers. Unionization could be a powerful tool to prevent exploitation in the fissured workplace. 

But given U.S. labor law, and employers’ tactics, unionizing can be a difficult hurdle, too. About 160 Planned workers in eight buildings in New Jersey unionized with 32BJ SEIU, including Pearson’s shop, but after three years, they still don’t have contracts, and two other unionized Planned buildings in New York also don’t have contracts. A spokesperson for 32BJ SEIU told me that the union “has brought charges against Planned for refusing to bargain in good faith. The NLRB Region 22 found merit in those charges. Planned settled, providing information it unlawfully withheld and finally made a wage proposal that it had refused to do.” However, that settlement has not yet resulted in a collective bargaining agreement. 

Pearson wanted me to know that the word “concierge” is likely derived from the Old French word for slave, something he finds deeply offensive. “The amount of mistreatment we go through at times is tied to that because we’re treated as such. We are all human beings, we all have families to provide for,” he says. “No uniform anyone wears should give anyone the right to be treated like that.”

Note: Planned Companies has three real estate divisions: Planned Building Services, Inc.; Planned Security Services, Inc.; and Planned Lifestyle Services, Inc. Because Planned Companies is the overarching entity, we refer to that entity throughout. According to SEIU 32BJ, the actual contracts in which the restrictive covenant appears are generally in the name of Planned Building Services and Planned Lifestyle Services.

Sarah is the Editor for Workday Magazine.