How Secret ‘Bondage Fees’ Trap Contracted Workers in Low-Wage Jobs
Photo courtesy of SEIU 32BJ.
Though the Federal Trade Commission is proposing to ban noncompete agreements, other kinds of restrictive covenants perform a very similar function.
by SARAH LAZARE
This article is a joint publication of Workday Magazine and The American Prospect.
For almost six years, Raymond Pearson has been working as a front-desk concierge at one of the Galaxy Towers condominiums in Guttenberg, New Jersey, answering phones, getting packages to residents, dealing with food delivery, and developing bonds with the people who live there.
“The residents become your family,” says Pearson, who is 34 years old and lives in nearby North Bergen. “You’re spending a lot of time with them. I’ve seen some of the residents’ kids graduate. I’ve seen some leave for prom. The same ones who left for prom, I’ve seen them leave for college.”
But it wasn’t until this year, he says, that he learned that this whole time his livelihood has been subject to a contract—made without his participation or consent—that contains a poison pill.
The troubling provision is not in Pearson’s own employment contract, but the one between his employer Planned Companies—a contractor that hires concierges, janitors, maintenance, and other building service workers—and the Galaxy Towers Condominium Association. According to Pearson’s union, SEIU 32BJ, the provision says that, if Galaxy Towers ever terminates its contract with Planned, the condo—or any of its affiliates—is prohibited from hiring employees of Planned, directly or through another contractor, for six months following the termination, unless it pays three months’ salary for every worker it keeps on. The penalty would also apply if Pearson were fired or quit; he would then not be able to work at an affiliate of Galaxy Towers for six months, unless Galaxy Towers were willing to pay the fee.
This arrangement effectively makes it cost-prohibitive for a building to keep on Planned employees, outside of direct business with Planned.
Under this kind of “restrictive covenant,” Planned is effectively able to say that, if a condo wants to get rid of them, it will have to get rid of their workers, too. And if their workers want to quit, they’ll have to find a job site that has no affiliation with the condo.
This means that—no matter how much specialized knowledge Pearson develops about the building, how many years of experience he accumulates, or how many residents he counts as friends—he is trapped as an employee of Planned, and stuck in relatively low-wage work, if he wants to keep working in the building. This is despite the fact that Planned advertises itself to prospective employees as “not just a job,” but a career. And, if residents don’t want to part with Pearson and other workers, they, too, are stuck with Planned.
Pearson says he is dismayed by the built-in limits to his career. In the years he has worked at his building, Pearson says he has worked hard to earn the trust of residents. He has even had to gracefully handle the unfortunate news when residents passed away in their units, including some by suicide. “This job has its ups and downs,” he says. “But residents like me. They know they can depend on me.”
“The part that upsets me,” Pearson says, “is that [Galaxy Towers] can just decide to get rid of the company, and we just get tossed aside.”
Noncompete clauses in workers’ contracts, which prevent them from accepting employment with a competitor, have drawn public scrutiny in recent years, and the Federal Trade Commission (FTC) is proposing to ban them. But worker advocates say restrictive covenants that constrain the mobility of workers are noncompetes by another name.
In some respects, restrictive covenants like Pearson’s are a more extreme version. They appear in contracts that the worker is not party to, and workers are typically unaware that they exist at the point of hire. They affect a highly exploited stratum of the U.S. workforce: those employed by intermediaries like staffing agencies, subcontractors, and brokers. And they erode the bargaining power of those workers even further, by restricting their ability to seek higher-paying jobs, no matter how valuable their skills.
Stuck in Low-Wage Work
Pearson is now part of an effort to challenge these practices, which are overseen by some of the biggest companies in building management. Planned is a subsidiary of the Toronto-based FirstService Corporation whose branch, FirstService Residential, calls itself “North America’s largest manager of residential communities.” On April 6, Pearson joined with two other Planned Companies workers to deliver a petition to a FirstService Residential office in Fort Lee, New Jersey, calling for an end to its restrictive covenants.
Last year, SEIU 32BJ filed a complaint to the FTC on behalf of Planned workers, charging that the company’s widespread use of restrictive covenants constitutes an “unfair method of competition,” which the agency has the authority to prevent.
Planned, which is headquartered in Parsippany, New Jersey, wields considerable market power in the Northeast and Mid-Atlantic, where it is among the biggest building management contractors. In northern New Jersey where Pearson lives, Planned accounts for almost half of all contracted workers who run doors and concierge services for buildings, according to the complaint.
SEIU 32BJ says that Planned “has a history of paying people poverty wages with few meaningful benefits.” According to SEIU 32BJ, the company has faced fines over the past ten years for wage theft from hundreds of New Jersey workers. The FTC complaint charges that workers could earn considerably more if they were employed directly by a building, or by one of Planned’s competitors.
Planned’s goal with restrictive covenants, the complaint says, is “to keep both buildings and workers captive to Planned, and to prevent competing contractors from hiring the most experienced workers.” Planned provides “minimal” training, yet exercises considerable power over workers’ lives. The penalty, the complaint says, is tantamount to a “bondage fee.”
Pearson says he is one of about 40 Planned workers in his building who are bound by such “bondage fees.” After six years, Pearson says he is among the higher earners at $20 an hour, but he labors alongside people who do not make much over the state minimum wage. The health insurance is so bad and employee premiums so high, he explains, that he decided to opt out and buy his own private insurance. Planned’s insurance, he says, would not have been much help for an upcoming surgery he needs.
Pearson’s workplace voted to unionize in the spring of 2019, and has been stuck in contract negotiations since that fall. Workers won elections at other Planned buildings, and now Pearson’s bargaining unit hovers around 150 people. These workers are fighting to improve their conditions and security in an industry that is increasingly embracing a labor model of worker precarity.
A Fissured Labor Model
“It used to be that fancy luxury buildings directly employed lots of people to help run the building,” says David Seligman, who filed the FTC complaint on behalf of SEIU 32BJ, and serves as the executive director of Towards Justice, a nonprofit law firm. “Those jobs were often union jobs, where you had the opportunity to retire. Over time, we saw those jobs become increasingly precarious, especially as the buildings shifted toward the use of intermediaries who would directly hire workers and directly employ them.”