Despite a relatively high-profile pivot away from a Biden-era rule ostensibly banning non-competition agreements nationwide last year, the Federal Trade Commission recently threatened to come down hard on a large employer in the pest control industry that was indiscriminately requiring the majority of its over 18,000 employees to sign stringent non-competition agreements. The company, Rollins, Inc., which is responsible for the pest control brands Orkin, Critter Control, and HomeTeam, agreed to end its blanket non-compete policy by way of a consent order entered into with the FTC.
There was a good deal of speculation regarding what, if anything, the FTC would do about non-competition agreements after it functionally abandoned its 2024 rule banning them. Statements made by the FTC Chairman in connection with the Rollins consent order make it clear that while the Commission does not view all non-competition agreements as anti-competitive behavior, crossing certain lines will catch the FTC’s attention. The FTC is on the lookout for what it deems “deceptive, unfair, and anticompetitive labor-market practices” which it is considering on a case-by-case basis. The Chairman stated that an “indiscriminate ‘general policy’ approach of requiring every single worker to sign a noncompete agreement irrespective of the worker’s position or responsibilities cries out for scrutiny under the antitrust laws.” To that end, the FTC has sent letters to thirteen other pest control companies regarding this issue. There is no reason to believe that the FTC will limit its review of non-competes to the pest-control industry, so this is a reminder to employers to take a look at their policies in this regard.
With the FTC’s ban on non-competes off the table, the law on the issue remains a hodgepodge of varying state laws. While the majority of states tend to allow some form of non-competition agreements in the employment context, several states, such as California, Colorado, and Illinois either ban or severely limit their use. However, the FTC’s recent action on the topic makes it clear that even if an employer’s non-competition agreement complies with the relevant state law, it is possible that the Commission may take issue with the policies around an employer’s use of such agreements. As such, it is currently recommended that employers utilizing non-competition agreements – particularly those that use them indiscriminately across large workforces – confer with experienced employment counsel regarding not only the substance of their non-competition agreements, but also their policies around which employers may be required to sign them.
Please reach out to any of Dykema’s Labor and Employment attorneys to discuss your company’s use of non-competition agreements in light of the FTC’s recent actions.s the impact of the Johnson decision on your business.