The US Federal Trade Commission (FTC or Commission), in the final two months of the Biden administration, entered into two settlements in cases targeting the use of so-called “no-hire” restrictions in services agreements. In both cases—Matter of Guardian Service Industries and Matter of Planned Building Services—the FTC claimed that contracts between building services companies and building owners that hired them violated the antitrust laws.
The contracts at issue are alleged to have restricted workers’ employment options by prohibiting the building owners from hiring the service companies’ employees. Both companies agreed to consent orders with the FTC that voided the no-hire provisions of their services contracts with customers.
These cases are the first successful antitrust challenges to the use of no-hire restrictions in contracts between companies and their customers. Concurring and dissenting statements in both cases from current FTC Chair Lina Khan and incoming Chairman Andrew Ferguson, respectively, provide valuable insight into how the FTC is likely to evaluate similar no-hire restrictions during the Trump-Vance administration.
In the first case, on December 4, 2024, the FTC issued an administrative complaint and a proposed consent order involving Guardian Service Industries Inc. (Guardian). Guardian is a building services contractor that provides concierge, security, custodial, maintenance, and related services to residential and commercial buildings, primarily in New York and New Jersey. Guardian’s contracts with building owners contained provisions that prohibited the building owners and their property management companies from hiring Guardian employees who worked in the buildings serviced during the period of the contract and for some time after.
The FTC’s complaint alleges that these provisions violate Section 1 of the Sherman Antitrust Act and Section 5 of the FTC Act, and the agreed consent order requires Guardian to void the “no-hire” terms and provide notice to customers and employees that the provisions are no longer in effect. The Commission’s vote to issue the complaint was 3-2, with Republican-appointed Commissioners Andrew Ferguson and Melissa Holyoak dissenting.
In his dissenting statement, Commissioner Ferguson argued that although he believes the FTC should focus on protecting workers, the Commission lacks authority to issue a complaint without a “reason to believe” that the respondent is using an unfair method of competition, as required by the language of FTC Act Section 5. Ferguson noted that the complaint did not allege that Guardian ever tried to enforce the “no-hire” provisions or that customers or employees believed Guardian would enforce the agreements. He further noted that neither the complaint nor the information obtained in the FTC’s investigation contained evidence of anticompetitive effects. Therefore, in his view, there was insufficient “reason to believe” that Guardian violated Section 5.
Commissioner Holyoak also dissented, citing similar concerns. The Commission majority disagreed, with Chair Khan arguing in her concurring statement that the “no-hire” provisions were anticompetitive on their face and that the Commission should not waste resources continuing to investigate when firms agree to settle and fully remedy the suspected violation.
The FTC issued a similar complaint and proposed consent order targeting Planned Building Services Inc. (Planned), another building services contractor. Planned employs more than 3,000 workers in New York and New Jersey who similarly provide cleaning, maintenance, security, and concierge services. Planned’s agreements with building owners contained provisions that prohibited Planned’s customers from directly or indirectly soliciting to hire Planned’s employees, both during the term of their employment and for six months thereafter.
The contracts also imposed a conversion fee requiring Planned customers to pay Planned the equivalent of up to three months of a Planned employee’s salary if the customer hired the employee. In contrast to the split 3-2 Guardian vote, in the Planned case, Commissioners Ferguson and Holyoak joined their Democratic-appointed counterparts in a unanimous 5-0 vote in favor of issuing the complaint.
In a statement accompanying the issuance of the Planned complaint, Chair Khan argued that Planned’s no-hire provisions are horizontal agreements not to compete, are not subject to protection as “ancillary” restraints (meaning adjacent to, and reasonably necessary for, an otherwise procompetitive transaction), and are therefore per se unlawful because Planned and its customers compete to hire service workers. Commissioner Ferguson disagreed, arguing in his concurring statement—joined by Commissioner Holyoak—that the “rule of reason” is the correct legal standard for evaluating Planned’s “no-hire” provisions because Planned’s customer contracts are primarily vertical in nature, rather than horizontal.
Commissioner Ferguson also argued that, unlike in Guardian, the FTC had evidence from its investigation into Planned, which gave him sufficient “reason to believe” that the anticompetitive effects of Planned’s no-hire provisions outweighed any procompetitive benefits, thus satisfying the standard for a “rule of reason” violation of the FTC Act. Per FTC policy, however, this evidence was redacted from the FTC’s public filings.
The Commission’s actions in the Guardian and Planned cases, and the differing views of outgoing Chair Khan and incoming Chairman Ferguson, provide insight into how the FTC may evaluate “no-hire” provisions during the Trump-Vance administration. As we have previously discussed, during the Biden administration and under the leadership of Chair Khan, the FTC was notably aggressive in its efforts to protect workers from perceived anticompetitive practices, including through the pursuit of a nationwide ban on the use of noncompete provisions (now enjoined by multiple court orders).
Since joining the Commission in April 2024, Commissioner Ferguson, often together with Commissioner Holyoak, has dissented from many of the FTC’s employment-related actions, including opposing the FTC’s proposed noncompete rule. Commissioner Ferguson also recently dissented from the FTC’s joint issuance with the US Department of Justice’s Antitrust Division of new Antitrust Guidelines for Business Activities Affecting Workers (DOJ-FTC Antitrust Guidelines), which we discuss in further detail in a separate LawFlash, although that dissent was largely on process grounds related to the impending administration change. Nevertheless, Commissioner Ferguson remains open to using the FTC’s authority, where he deems it appropriate, to address anticompetitive practices that affect workers. In his Guardian dissent, for example, Commissioner Ferguson emphasized that the FTC “is wise to focus its resources on protecting competition in labor markets. After all, the antitrust laws protect employees from unlawful restraints of the labor markets as much as they protect any output market.” Commissioner Ferguson expressed a similar view in his Planned concurrence, arguing that “the Commission should devote resources to protecting competition in labor markets.”
These cases suggest that, under the leadership of incoming Chairman Ferguson, the FTC will continue to scrutinize “no-hire” restrictions, particularly in low-wage and service industries, but may insist on a higher level of evidence of anticompetitive effects—beyond the mere existence of “no-hire” provisions in contracts—before opting to bring enforcement proceedings. As Chair Khan’s statements in both cases illustrate, her view, joined by the other two Democratic-appointed Commissioners, is that “no-hire” agreements constitute horizontal, per se unlawful restraints of trade in labor markets and should therefore be condemned without requiring a detailed inquiry into their actual effects on competition in specific cases.
Commissioner Ferguson’s statements, in contrast, reflect his view—which is likely to carry the day under a Republican-controlled FTC during the Trump-Vance administration—that “no-hire” agreements, at least as between a vendor and its customers, are predominantly vertical in nature, and thus subject to the rule of reason and will require evidence of anticompetitive effects adequate to have a “reason to believe” that the anticompetitive effects outweigh any procompetitive benefits before taking enforcement action. In fact, in his recent dissent from the issuance of the DOJ-FTC Antitrust Guidelines, Commissioner Ferguson made clear the extent to which he believes his views on antitrust enforcement in labor markets are likely to prevail under the new administration, declaring “[t]he Biden-Harris FTC has no future.”
As we turn the page from the Khan era to the Ferguson era, employers should be aware that, although the FTC may adhere to a somewhat stricter standard in deciding when to bring enforcement proceedings in “no-hire” agreement cases, they should expect the FTC to continue to investigate such practices and to bring enforcement actions where there is sufficient “reason to believe” that the no-hire agreements have a net anticompetitive effect. Moreover, irrespective of the likely trajectory of FTC enforcement in the no-hire context, the reality is that there is now—perhaps for the first time—precedent for finding no-hire provisions in contracts between companies and their customers unlawful under the antitrust laws. This may have further implications for employers in terms of fostering additional scrutiny and private litigation where no-hire agreements are in place.
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