ESA workers face a maze of non-compete clauses and service contracts

A system of non-competition clauses enforced by the European Space Agency’s (ESA) workforce suppliers is allegedly trapping aerospace professionals who work at ESA’s facilities across Europe in a professional dead-end street. Their contracts prevent job mobility and the possibility to earn better pay, a large number of contractors have alleged to Ars Technica. And as nations that host ESA facilities have enacted laws that give some contractors greater rights, the ESA itself has adopted a policy that will shift more of its indirect employees to service positions, which would not be protected by these laws.

When asked about these issues, an ESA spokesperson said there are “employment conditions in which ESA is not to interfere” and that non-competition clauses “remain within the remit of the employer and the employee.”

The European Space Agency, Europe’s version of NASA, is an intergovernmental organization comprising 22 member states. With facilities in six European countries, the agency relies on contractors—scientists, engineers, and admin workers—hired through payroll companies. These contractors, who work alongside ESA’s staff on the agency’s space projects, constitute over half of the agency’s workforce, according to available estimates.

Many of these professionals relocate from across Europe and beyond to work at one of the ESA centers, drawn by the opportunity to participate in Europe’s most ambitious space exploration endeavors. But as interviews with tens of contractors make clear, some feel the companies’ non-compete clauses block their professional growth and stifle competition in the job market.

While contractors and non-competes have been common in tech employment, the distinct features of ESA—including its above-the-law status and a culture that exposes over a third of its workers to harassment—makes them especially problematic.

We own you!

“The non-compete basically says I cannot take another job that will impact the business interests of my company in the Netherlands and Belgium for one year,” said Roger, a contractor at the European Space Research and Technology Center (ESTEC) in the Netherlands, which is ESA’s largest establishment. “When I wanted to change contracting companies, I was told that it was not possible, even when the [other ESA] position was not available to my own company.”

The non-compete clauses don’t immediately expire, even if the worker loses his or her job, unless the employer releases the worker from it. Sources reported that some companies are more likely to let workers go in certain situations. Others said they were threatened with legal action when they wanted to leave.

“I was once offered to switch to another manpower company that was offering me 20,000 euros per year more for my experience,” said ESTEC contractor George. “One of the directors of the company that I was with told me that they owned me and threatened to sue me.”

If the company does not release the worker, the only chance to leave the non-compete is to challenge it in court. Most workers told Ars they are reluctant to do that due to the financial risks and the sense that pursuing a suit would destroy their relationship with the employers.

Workers tell Ars that they also have non-disclosure orders attached to their contracts that prevent them from discussing issues they have with the non-competes. (For this reason, all sources quoted in this investigation were anonymized.)

Controversial

Non-competition clauses are a controversial topic worldwide, as they can prevent workers from finding new opportunities in rival companies or starting a competing business of their own. The clauses were largely eliminated in California in 2008, and the US Federal Trade Commission followed the example set by the Golden State on April 23 this year, banning non-compete clauses in the US altogether (although that policy has been challenged in court). The agency said the clauses were “an unfair method of competition” and rendered them unenforceable in most cases.

The restrictions are almost ubiquitous in executive and higher management contracts, applying to 98 percent of positions, according to the US Government Office of Accountability. Overall, about 20 percent of employees in the US have had non-compete clauses in their contracts, according to the agency.

In Europe, the UK government announced last year that it will restrict the enforceability of non-compete clauses to three months, saying their use limits the workers’ professional mobility. But in other European countries, such as Germany and the Netherlands (where ESA’s largest establishments are located), non-competition clauses can legally ban workers from taking jobs with competitors for a period of up to a year and are enforceable through hefty fines.

Trade in workers

Non-compete clauses are primarily intended to prevent workers from taking a company’s trade secrets to a competitor. But in the case of ESA’s workforce supply companies, they can also prevent contractors from taking another, possibly better paying job at ESA available through another workforce company. Since all of the work is for ESA, it’s unclear what secrets are being protected.

Because many of these contracting companies also operate in industries outside the space sector, workers may struggle to find opportunities in other tech industries served by them. Some of the non-competition clauses threaten workers with penalties of up to 25,000 euros if they were to violate their terms.

According to contractors who have spoken to Ars Technica, ESA teams have historically contained a mixture of the agency’s direct staff members working with contractors employed by multiple manpower companies, raising questions about the degree to which any project information can be protected. The contractors also say that they do not possess any of their companies’ know-how or trade secrets, as they work fully integrated into ESA’s specialist teams and have been, in most cases, selected directly by ESA’s experts, who they work alongside.

Contractors also claim to have very limited insight into the internal operations of the contracting companies, leaving them with little in the way of secrets to share. “As soon as you are hired, there is no contact. They [the workforce companies] do not care,” said Richard, also an ESTEC contractor. “I think my company needs about one day a year to deal with me, which involves mostly paperwork when I go on a mission and when they read my emailed complaints.”

Former ESTEC contractor James said, “I saw them [the workforce company managers] only when we signed the contract, which was at a hotel lobby somewhere. I have never been to their office; I have never discussed work with them, because they really are just headhunters, and they know nothing about my field.”

Roderik Mol, the director for flexible work at the CNV Union, which represents about 200 ESTEC contractors, considers the use of non-compete clauses at ESA to be “not in the best interest of ESA” as it can prevent the agency from “getting the best person for the best position.”

“I think the clauses are ridiculous, especially when it hinders people from continuing to work at ESA through another hirer,” Mol told Ars Technica. “A clause is intended to protect companies in connection with their knowledge and skills. But this is just to protect their trade in workers.”

ESA, however, doesn’t see a problem: “Similarly to other employment conditions in which ESA is not to interfere, non-competition clauses remain within the remit of the employer and the employee negotiations, in compliance with national law which applies to such employment contracts,” the agency told Ars Technica in an email.

ESA cash cow

The effects of these restrictions are most apparent at ESTEC, which employs over half of the 2,700 on-site contractors estimated to work at ESA. A main employer of aerospace professionals in the Netherlands, ESTEC could offer plentiful opportunities for professional growth. But contractors say that not only is their job mobility restricted, but their salaries also end up permanently locked, with barely any adjustment for inflation.

The contractor we called Roger says that the reality of the situation is not clear to most workers at first. Initially, contractor salaries are likely to appear generous—above industry standards—especially to young professionals five to 10 years into their career. “The strategy of contracting companies is to offer an attractive package upon entering and then never offer raises or salary increases,” Roger alleged.

The situation is frustrating to the contractors, as documents shown to Ars Technica indicate that in some cases, ESA pays the contracting companies more than double the amount the employee earns. For example, in the Netherlands, the agency pays about 135,000 euros per year for an experienced engineer. Information collected from the contractors, however, reveals that these workers receive between 60,000 and 100,000 euros per year, depending on how well they negotiated their contracts.

According to an open letter authored by an anonymous group of contractors and reportedly distributed at the council of ESA member states in November 2022, “30 percent to 50 percent of overhead is put on a professional employee under [contracts with manpower companies] at ESTEC year after year.”

Working conditions

ESA contractors who spoke to Ars Technica also complained about limited job security and worsening working conditions. In a previous investigation, Ars Technica reported multiple cases of ESA contractors who alleged that they had been fired after raising complaints about managers they viewed as abusive or requesting a medical leave to recover from burnout. The contractors also allege that the manpower companies that hired them do not protect them in such cases and instead cooperate with ESA to find justifications for the workers’ dismissal.

Several contractors also described how the contracting companies don’t provide new hires with a clear picture of how local laws will affect their pay and complained of recruitment practices they view as deceptive.

James, who was working in Spain when approached, said the manpower company headhunter neglected to explain a Dutch tax break, called the 30 percent ruling, that allows newly arriving expat professionals to pay tax on only 30 percent of their earnings—but only for their first five years in the country. “They just showed me how much money I would receive in my bank account every month,” James said. “But after this ruling expires, your salary is crap. It would be just a little higher than the one I had in Spain, and for that, I would never have moved to the Netherlands.”

James left his contractor role at ESA before the break expired.

George reported a similar experience. Just like James, George uprooted his family and moved to the Netherlands from abroad under the impression that he was taking an ESA staff position, only to find out that he was a contractor and his promised take-home salary would take a 30 percent cut in the future. “I only found out about the 30 percent ruling from my Dutch accountant after I took the job and relocated from abroad,” said George. “I will lose 2,000 euros a month when the ruling expires.”

The anonymous open letter mentioned above echoes these testimonies, stating that employment agencies use “the 30 percent ruling to normalize salaries with the Dutch market,” making salaries appear higher through the temporary tax break. Just like James and George, other contractors arriving from abroad have told Ars that they feel misled by the initial salary offer when they realize they will face a significant cut if they continue working as contractors at ESA for more than five years.

Others reported a lack of clarity about job duties. Paul, another former ESTEC contractor, told Ars that his working hours were specified in his contract as nine to five. But once he had taken up the job and relocated from abroad, his superiors at both ESA and his workforce company expected him to cover late night shifts every two weeks and frequently arranged meetings well after the official working hours. When he objected, he was told his only other option was to leave.

“I was later told by a Dutch citizen advice office [Juridisch Locket, a government service] that what my company was doing was a violation of Dutch employment law,” said Paul. “But I was afraid to ask anyone to intervene because I couldn’t afford losing my job.”

Diminished positions

The sources we spoke with said the contractors’ situation within ESA appears to be getting worse in recent years. They believe the agency is trying to protect itself against allegations of labor law breaches brought by former contractors who have recently seen some success in European courts.

In 2019, communication specialist Ivan Balenzio successfully sued ESA and Kelly Services, a workforce company through which he was employed at the agency Center for Earth Observation (ESRIN) near Rome, for paying him considerably less than colleagues employed as ESA’s staff were earning. Labor laws in many European states, including the Netherlands and Italy, guarantee contract workers equal conditions to those offered to staff members. Yet Balenzio told Ars Technica that one of his staff colleagues was employed in an identical role yet earned 1,000 euros per month more than him. An Italian court agreed that ESA and Kelly Services owed Balenzio money.

A 2019 memo from the ESA’s Director General made it official policy to move existing contractors to service positions where possible. It states, “The Agency shall strive to carry out its activities and operations in the most efficient and effective manner, either through ESA staff or through outsourcing mainly by service provision on-site or off-site, reducing progressively reliance on Loan Employment.” “Loan employment” means contractors; “service provisions” allow the use of temporary employees who are not subject to the equal salary rules.

In a statement on its website, the CNV Union representing ESTEC contractors says the ESA has made this switch to circumvent the European labor laws, which grant loaned workers equal rights to those of direct staff members. The CNV Union calls the changes “a formal legal scaffolding that does not align with the spirit of the law, disregarding the interests of those affected.” CNV also said this move makes the contractors even more vulnerable to the whims of ESA managers. The anonymous letter by ESTEC contractors discusses this move as well, describing it as a “paperwork exercise” that further erodes contractors’ rights.

Despite all these changes, the contractors are still bound by the same stringent non-compete clauses.

While the original arrangement saw multiple workforce companies in competition for open ESA positions, service contracts are largely controlled by a single company that has won an agreement to supply a certain type of worker. Should the contracting company ever lose out to a competitor, the contractors employed under this agreement stand a higher risk of losing their jobs since the non-compete clauses prevent them from moving to the company with the winning bid unless they are released from these restrictions.

“[The non-compete] poses a huge risk to my career,” said Brian, an ESA contractor in Germany. “I will not be able to continue anywhere near ESA if my company doesn’t get the contract. It is extremely abusive.” He notes that, while ESA service contracts usually run for a period of five years, the employees usually have open-ended contracts with their workforce agencies and no limits on the application of the non-compete clauses.

Multiple contractors who have been made to switch to the service contract told Ars Technica that their day-to-day duties have not changed. They have, however, noticed that their rights have been reduced.

“I was told at one point that I couldn’t sign documents any more—things like meeting minutes, invoicing for milestones,” said James. “Previously, I was regularly signing approvals for invoices of several million euros. So, I told them, well, if I don’t need to sign things, that means I don’t need to go to [the relevant] meetings. But they said, no, you have to go there, you will review everything, and somebody else will sign for you.”

The service contractors, frequently highly educated and experienced experts, also report they aren’t given credit for their work, which limits their further career advancement. “Writing programmatic documents—white papers, strategies, statements of work—is a day-to-day business of a service contractor,” said Roger. “But nowhere in such a document you will find their names.”

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