Employers hoping the new administration would scale back scrutiny of employee non-compete agreements may need to reconsider. The Federal Trade Commission (FTC) continues to aggressively challenge non-compete agreements under Section 5 of the FTC Act, as shown by its recent consent order with Rollins, Inc., the parent company of Orkin, HomeTeam and Critter Control. The FTC alleges that broad non-compete agreements restrict employee mobility and suppress competition, particularly for non-executive workers. The Rollins case provides an important warning for employers that use non-compete agreements, restrictive covenants or post-employment restrictions and offers insight into how the FTC may continue enforcing federal non-compete rules despite ongoing legal challenges to a nationwide non-compete ban.

Although the recent decision applies only to Rollins, it provides a window into how the FTC analyzes non‑competition agreements, the types of remedies it is seeking and the type of compliance it expects. Employers should take note.

Link to The Rollins FTC order: What happened? The Rollins FTC order: What happened?

Rollins provides pest and wildlife control services to residential and commercial customers across 700 branches in the United States. Rollins employs more than 18,000 U.S. employees. Following an investigation, the FTC alleged Rollins used non‑competition agreements with nearly all employees. The non-competition agreements prohibited, for two years following termination of employment with Rollins, employees from “working in the pest-control industry within a predetermined distance—usually a 75 miles radius around the Rollins location at which the employee worked but often a multi-county region.”

The FTC alleged the non-competition agreements restricted employees’ job mobility and suppressed competition in violation of Section 5 of the FTC Act. The FTC specifically took issue with Rollins’ use of non-competition agreements for rank-and-file employees, such as pest-control technicians, sales representatives and customer service personnel.

Without admitting liability, Rollins entered into a consent order that imposes sweeping restrictions on its use of non‑competition agreements for a 10‑year period, along with extensive notice and reporting obligations.

Link to Who was covered? Who was covered?

The FTC viewed non‑competition agreements for non‑executive employees as especially suspect. The consent order applies broadly to covered employees, including branch‑level employees such as pest-control and termite technicians, sales inspectors, account managers, customer service representatives, service managers or branch managers.

The FTC only allowed Rollins to continue using non-competition agreements for those eligible for equity or equity-based interests in Rollins as a benefit of employment: directors, officers and senior leaders. Senior leaders are employees who possess significant policymaking authority.

Link to What conduct must the employer abate? What conduct must the employer abate?

Under the order, the employer must:

  • Stop communicating about, entering into, maintaining, enforcing or threatening to enforce non‑competition agreements with covered employees and prospective employees.
  • Eliminate any penalties or fees tied to existing non‑competition agreements.

Rollins must also:

  • Rescind existing non‑competition provisions, rather than simply agree not to enforce them,
  • Send individualized written notice to every covered employee informing them that their non‑competition agreements are “null and void.”
  • Provide copies of the consent order to Human Resources leaders and executives.
  • File interim, annual, and supplemental compliance reports for up to 10 years.
  • Maintain records and submit audits and interviews to the FTC upon request.

The order also limits the employer’s ability to restrict customer solicitation, allowing employees to solicit customers through general advertising and responses to inbound inquiries.

Notably, the FTC reaffirmed that non‑competition agreements tied to the sale of a business remain permissible only if the subject individual has a pre‑existing equity interest in the business being sold.

Link to Employer takeaways Employer takeaways

The Rollins order reinforces that, even amid legal challenges to the FTC’s proposed nationwide non‑compete ban, the agency is using its existing authority to pursue case‑by‑case enforcement.

The FTC’s posture suggests it will continue to target broadly applied, standardized non‑competition agreements covering lower‑wage or non‑executive workers, non‑competition agreements used outside the context of a business sale and post‑employment restraints that exceed what is necessary to protect legitimate business interests.

Employers who use non-competition agreements should consider taking the following steps:

1. Audit who truly needs a non‑compete

Evaluate whether existing non‑competition agreements are limited to executives, senior leaders and employees with authority and access to competitive information or equity incentives. Using non‑competition agreements too broadly significantly increases enforcement risk.

2. Strengthen non‑disclosure and trade secret protections

Employers may lawfully use confidentiality agreements, trade secret provisions and narrow non‑solicitation provisions (where permitted by state law). These tools provide meaningful protection without the regulatory risk associated with non‑competition agreements.

3. Review sale‑of‑business non‑competes carefully

Ensure that any transaction‑related non‑competition agreement is tied to a bona fide sale of a business, covers only individuals with an actual pre‑existing equity interest and is reasonable in scope and duration.

4. Coordinate state law and FTC Risk

Even if a non‑competition agreement may be enforceable under state law, employers should assess whether it could still draw attention from the FTC and whether narrower alternatives may achieve the same goals.

The FTC continues to view employee non‑competition agreements, especially for non‑executives, as a priority enforcement area. Employers who continue to rely on standardized non‑competition agreements face growing legal and regulatory risk.

Now is an appropriate time for employers to reassess restrictive covenant strategies and ensure non-competition agreements are narrowly tailored, defensible and aligned with evolving federal enforcement trends and continually evolving state laws.