FTC’s Scrutiny of Non-Compete Agreements Provides Key Lessons for Businesses

By: Jordan Briggs

Recently, the Federal Trade Commission (“FTC”) announced it finalized a consent order with pest control company Rollins, Inc. that requires Rollins to stop enforcing its existing non-compete agreements with over 18,000 employees.[1] This consent order signals that although the FTC stopped pursuing an outright ban on employee non-compete agreements,[2] the agency is still poised to limit the anticompetitive effects of these non-competes. The Rollins Complaint gives insight into certain common non-compete pitfalls to avoid.

Non-compete agreements are a relatively common tool used by companies in specialized industries to minimize the harm to the company if an employee joins a competitor. These agreements allow the company to restrict an employee’s ability to work for or start a competing business after leaving the company. Companies invest heavily in employees, often providing employees in these fields with access to sensitive or confidential information, even trade secrets. Over time, the employee develops a specialized skillset that benefits both the company and the employee.

However, if the employee wants to change employers, the company’s and the employee’s interests diverge. The company wants to protect its investment, but the employee’s skillset now directly translates only to working at the company or for a competitor. Absent a non-compete, the company’s proprietary information is at risk of exposure to a competitor. Alternatively, too restrictive a non-compete would require the employee to move their lives to a new location or abandon their skillset and make a complete career change. This potential point of contention is where the FTC steps in to prevent antitrust law violations.

The FTC uses a reasonableness test when determining whether a challenged non-compete agreement is enforceable under the Federal Trade Commission Act (“FTCA”) Section 5.[3] Per the statement by Chairman Ferguson and Commissioner Meador on the proposed consent agreement with Rollins, “a non-compete agreement violates the antitrust laws where the anticompetitive effects of the restraint outweigh any procompetitive effects that could not be achieved through substantially less restrictive means.” Essentially, the non-compete must strike a reasonable balance between the company’s interests and the employee’s interests.

In the case of Rollins, most of the company’s 18,000 employees across 700 locations were subject to restrictive non-competes, often for two years within a 75-mile radius of their job site. These agreements were enforced indiscriminately against all levels of employees. The FTC saw the non-compete agreements as too restrictive, too one-sided in the company’s favor, and too broadly applied and enforced. The FTC’s Complaint against Rollins[4] offers some guidance on how to tailor non-competes for both company protection and enforceability.

Specific Job Responsibilities

The FTC emphasizes throughout the Complaint that the Rollins employees were indiscriminately required to sign non-compete agreements. However, not every role has access to or control over sensitive company information. For example, research and development engineers might require access to proprietary information or trade secrets, but customer service representatives and on-site service technicians likely do not. Accordingly, the company’s interests are not significantly impacted by the loss of certain employees, so the company does not need every employee to sign a non-compete. Alternatively, the company may be able to protect its interests through other means (some discussed below). Even if a company determines that a few less specialized roles still handle sensitive data, the company can tailor its non-compete agreements accordingly.

Scaling Restrictions

As discussed, not every employee needs to sign the same non-compete agreement. The restrictions should also scale with the job responsibilities, access to information, sensitivity of the information, number of competitors in the field, and other considerations unique to the company. While a one-year non-compete agreement may be reasonable for an officer of the company with access to the entire network of company knowledge, it is less likely to be appropriate for someone who only has access to the tools provided directly to them by the company.

Power to Negotiate

The FTC alleged that most Rollins employees have no power to negotiate the non-compete agreements and pointed out that some employees received the agreement in the field with no time to contemplate its effect. Generally, when a company is on one side of an agreement with an employee on the other side, the balance of negotiating power is tipped toward the company. When the employee is considered a sophisticated party, such as a highly desired specialist or an officer of the company, the employee may inherently have more negotiation power than the average employee. However, a salaried or hourly at-will employee is generally considered to have less negotiating power when it comes to non-compete agreements and other restrictive covenants.

Accordingly, the company may need to provide the average employee with more resources to level the negotiation field. For example, the company could provide additional compensation for signing the non-compete at the time of signing or at the time of departure. Additionally, the company should allow employees a reasonable amount of time to consider the agreement (accounting for the fact that “reasonable” is fact-dependent and not always uniform).

Enforcement

While the FTC included Rollins’s enforcement of its agreements as an example of unfair and anticompetitive action, a reasonableness test was first applied to the whole of the circumstance and informed this allegation. On the whole, as alleged by the FTC, Rollins was using expensive legal tactics to enforce a heavily restrictive agreement against relatively low-paid employees with access to little more industry information than what is available to the public.[5] Nonetheless, choosing simply not to enforce the agreement is also ill-advised. A restrictive agreement that is signed but, by practice, not enforced calls into question the agreement’s general enforceability. Similarly, a company cannot avoid having more legal resources than the average individual. Best practice is to instead draft a non-compete that is tailored according to company- and fact-specific considerations so that enforcing the agreement is neither unfair nor anticompetitive.

Consider Alternatives

There are many reasonable alternatives to non-compete agreements that may serve the company’s purposes better or just as well. One highlighted by the FTC is a non-solicitation agreement. Relatively lower paid workers might not have access to proprietary formulas and data, but many have access to customer lists, which can be vital in many industries. A non-solicitation agreement that restricts these employees from taking copies of the customer list, contacting customers about industry-related topics, or otherwise “poaching” customers protects the company’s investment in procuring and keeping those customers without unfairly restricting competition.

Other alternatives include confidentiality agreements, non-disclosure of trade secrets agreements, and restrictive covenants in an employment agreement. While these agreements are not inherently more or less conscionable than a non-compete, in the right circumstances, they may be a better fit to balance the interests of both the company and its employees. The key is to pick the right kind of agreement or clause for each specific situation.

Other Legal Considerations

This piece discusses federal law as enforced by the FTC. However, it is important to note that non-compete agreements must also be tailored to be enforceable under applicable state law. A well-drafted contract will choose which state’s law applies, but the state in which the employee signs, lives, or works could still affect the agreement’s enforceability. For example, California bans most non-compete agreements,[6] while New York-based non-competes must pass the state’s reasonableness test.[7] Companies should also be aware that the FTC is tasked with enforcing anti-trust laws under the FTCA, but private citizens can sue the company under state laws.

This list contains theoretical solutions to common problems in drafting and enforcing non-compete agreements. In practice, the balancing test required of a non-compete agreement is highly-fact specific and requires knowledge of the industry, the company, and the federal and state law. If your company is looking to implement a non-compete agreement or other measures to protect your company’s proprietary information, reach out to us here at Ifrah Law.

[1] Press Release, “FTC Approves Final Consent Order in Pest-Control Non-compete Matter” FTC (June 22, 2026), available at https://www.ftc.gov/news-events/news/press-releases/2026/06/ftc-approves-final-consent-order-pest-control-non-compete-matter.

[2] Two years ago, the FTC published a rule effectively prohibiting employee non-compete clauses. See George Calhoun, “The FTC Kills Non-competes” Ifrah Law, FTC Blog, (Apr. 30, 2024), available at https://www.ifrahlaw.com/ftc-beat/the-ftc-kills-non-competes/. However, in August 2024, a federal court stopped the rule from taking effect, and the FTC has since abandoned its defense of the rule. “The Non-compete Rule is not in effect and it is not enforceable. On August 20, 2024, a district court issued an order stopping the FTC from enforcing the rule. The FTC appealed that decision on October 18, 2024. On September 5, 2025, the FTC took steps to dismiss its appeal in the Fifth Circuit.” Press Release, “FTC Announces Rule Banning Non-competes” FTC (Apr. 23, 2024), available at https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-non-competes (last visited Apr. 15, 2026).

[3] 15 U.S.C. § 45.

[4] In re Rollins, Inc., Complaint, FTC, Docket No. C-4835 (June 22, 2026), available at https://www.ftc.gov/system/files/ftc_gov/pdf/251_0011_rollins_complaint.pdf.

[5] Id. ¶¶ 9–11. These employees may have had access to client lists, which may be more narrowly protected, as further discussed below.

[6] See CA Bus & Prof Code § 16600 (2025).

[7] “Non-Compete Agreements in New York State: FAQ” NY Atty. Gen. (Feb. 2022), available at https://ag.ny.gov/sites/default/files/non-competes.pdf; but see Luis Ferré-Sadurní, Hochul Vetoes Ban on Non-compete Agreements in New York, NY Times (Dec. 22, 2023), https://www.nytimes.com/2023/12/22/nyregion/kathy-hochul-veto-non-compete.html.