Antitrust

Following the collapse of the Federal Trade Commission’s Non-Compete Rule, the FTC has returned to what FTC Chairman Andrew Ferguson said it should do all along: challenge specific non-compete agreements on a case-by-case basis.  While the Non-Compete Rule is gone, the FTC’s interest in non-compete agreements is not. 

Over the last year, the FTC’s actions in Rollins, Gateway Services, and its non-compete warning letters together offer a useful framework for companies to ensure their non-compete agreements do not run afoul of the antitrust laws: the broader, blunter, the less necessary the restraint, and/or the less bargaining power or consideration, the more likely it is to draw scrutiny. 

The FTC’s actions do not establish a bright-line test, but they suggest a practical checklist:

• Use non-competes intentionally, not by default.
• Limit non-competes to employees at a certain level or authority for whom the covenant can be specifically justified.
• Tie the covenant to a concrete business need or legitimate business interest (i.e., protection of trade secrets, confidential information and customer goodwill).
• Pressure-test whether a narrower alternative might work.
• Keep the duration and scope as narrowly tailored as possible.
• Be especially cautious where employees lack bargaining power or receive no meaningful consideration in exchange for a non-compete.

From Rulemaking to Enforcement

As previously reported by Weil, the Biden-era Non-Compete Rule would have prohibited nearly all non-compete agreements nationwide. Then-FTC Commissioner Ferguson was vocal in his skepticism of the controversial Non-Compete Rule when it was issued, arguing that the Rule was unlawful as an administrative matter.  Later, Chairman Ferguson withdrew the FTC’s defense of the Rule after it was enjoined and vacated in federal district court.  At each turn, however, he has emphasized that his opposition to the Rule should not be mistaken for an endorsement of all non-compete agreements. 

Chairman Ferguson has pledged that the FTC will continue to “enforce the antitrust laws aggressively” against unjustified non-compete agreements by “patrolling [] markets for specific anticompetitive conduct that hurts American consumers and workers.”  In warning letters to healthcare employers and staffing companies, Chairman Ferguson signaled that the FTC intended to use Section 5 of the FTC Act to challenge unlawful non-compete agreements. The FTC also entered a complaint and consent order against Gateway Services, Inc., requiring the pet cremation company to end non-compete agreements with its employees.

Most recently, on April 16, 2026, the FTC entered a complaint and consent order against Rollins Inc., the parent company of the Orkin brand of pest control services, for its non-compete agreements that affected nearly all of its more than 18,000 employees. Importantly, the Rollins decision specifically carved out agreements “in conjunction with the acquisition of a business, provided that individuals subject to such an agreement have a preexisting equity interest in the business being acquired.”

What Rollins Adds

The FTC’s latest action against Rollins and warning letters to companies in the pest control industry underscore the agency’s enforcement priorities and suggest several factors employers can use to justify the reasonableness of certain non-compete agreements.

Narrow, Individualized Non-Competes Are Lower Risk

Chairman Ferguson’s statement accompanying the Rollins action suggests narrowly targeted non-compete agreements can be defensible.  According to the complaint, Rollins’ non-compete agreements covered the “vast majority of Rollins’ more than 18,000 employees as well as many thousands of former employees” with very few exceptions.  These agreements were extended without “individualized consideration of an employee’s role” and for “up to two years post-employment.”  Many employees subject to the non-competes were technicians and customer service representatives who were unlikely to have confidential information or trade secrets that might warrant the protection of a non-compete agreement.  To mitigate risk, employers should avoid treating non-competes as routine paperwork; an individualized approach with limited and tailored contractual durations and focused on employees with extensive training, responsibilities over developing and maintaining customer relationships and goodwill, and/or or access to proprietary information will be more defensible.

Employers Need a Real Business Justification

In Rollins, the FTC’s search for counterbalancing procompetitive justifications “c[a]me up nearly empty.”  Examples of potential justifications could include incentivizing investments in employee training and development, protecting confidential information, trade secrets and intellectual property, and encouraging intra-firm collaboration particularly in terms of developing and maintaining customer relationships and goodwill.  Because Rollins published its pest control methods on its website and via YouTube videos, the FTC alleged it could not claim it needed non-compete agreements to protect its intellectual property and know-how.  It also alleged Rollins provided the same level of employee training regardless of whether non-compete agreements were used or enforced, thus the agreements did not incentivize the company to provide enhanced training.  The Commission’s analysis demonstrates that, at a minimum, the FTC expects employers to show some legitimate business justification to support the implementation of non-competes.

Narrower Alternatives Matter

The Analysis to Aid Public Comment accompanying the Rollins consent order points out the existence of “less restrictive alternatives” can be “dispositive” to the antitrust analysis.  Even where Rollins’ technicians had access to the company’s customer lists, the Commission stated that its interest in protecting those lists could be sufficiently addressed through narrowly tailored non-disclosure agreements and non-solicitation agreements.  The Commission’s analysis suggests that showing a legitimate business justification for a non-compete provision may not be sufficient for the FTC —a company also must demonstrate that the non-compete is necessary to achieve that legitimate business goal. 

Limited Harm

The Commission stressed that the Rollins non-competes were anticompetitive in part because they altered the bargaining position between employees and Rollins by curtailing the employees’ outside options, resulting in lower wages and salaries, reduced benefits, and less favorable working conditions.  That does not mean that every restraint on mobility is unlawful.  Antitrust agencies are likely to examine the duration, geography, scope, and practical effect of a non-compete agreement on an employee’s ability to move to another job or help a rival enter or expand, and balance those effects against the procompetitive justifications for the non-compete.  Antitrust agencies are also likely to evaluate the relevant employee(s) position and access to information – for example, the FTC affirmatively permitted Rollins to continue non-competes for employees likely to have access to competitively sensitive information, including “directors, officers, or other defined senior leaders who exercise policy-making authority and are eligible for grants of equity.”

Bargaining Power and Consideration Can Lower Risk

The FTC would likely view non-compete agreements with employees who can bargain for appropriate parameters and consideration more favorably under the antitrust laws. The Rollins complaint questioned non-compete agreements for employees “who had no ability to negotiate” and received no “extra compensation” for signing them.  According to the FTC, Rollins generally did not provide employees with an opportunity to consider or understand the non-compete agreements; employees sometimes signed them “in the field or on the job, without time for reflection.”  Further, Rollins sent “hundreds of cease-and-desist letters” and filed “multiple lawsuits” against former employees alleged to have breached these agreements.  These former employees often had limited resources to oppose Rollins’ legal challenges.  This imbalance in power, both in terms of bargaining and enforcement, likely further motivated the Commission’s concern.

Conclusion

The precise contours of non-compete agreements under the antitrust laws will continue to develop with additional agency action and private litigation. Notably, this evolution takes place against a backdrop of state and local governments continuing to impose and revise restrictions and procedural requirements on the use of non-competes. While the business community should remain mindful of local and state law, the FTC’s recent string of cases and the accompanying statements provide additional clarity about when a business can legitimately enter non-compete agreements with employees.