FTC Continues Enforcement Against Employee Noncompetes After Nationwide Rule Is Vacated

On April 23, 2024, the Federal Trade Commission issued a final Rule banning most noncompete agreements nationwide. Under the Rule, existing noncompetes for the vast majority of workers would no longer have been enforceable after the Rule’s effective date in September 2024. The Rule carved out an exception for existing noncompetes with certain senior executives, but would have prohibited employers from entering into new noncompetes with any workers, including senior executives.

The FTC Nationwide Noncompete Ban Never Took Effect

On August 20, 2024, a federal district court in Texas set aside the Rule and prohibited the FTC from enforcing it. The court held that the FTC exceeded its statutory authority in adopting the Rule, finding that Congress had not granted the FTC authority to promulgate substantive rules regulating unfair methods of competition.

The FTC initially appealed that decision. Following the change in presidential administrations and FTC leadership, however, the agency changed course. On September 5, 2025, the FTC took steps to dismiss its appeals and accept the court’s vacatur of the Rule. The FTC’s nationwide Noncompete Rule is therefore not in effect and is not enforceable.

But the demise of the nationwide Rule has not ended the FTC’s scrutiny of employee noncompetes.

FTC Creates Joint Labor Task Force

In February 2025, FTC Chairman Andrew Ferguson created a Joint Labor Task Force to focus the agency’s resources on investigating and prosecuting deceptive, unfair and anticompetitive practices in labor markets. The Task Force brings together personnel from several FTC bureaus and offices to coordinate the agency’s labor-related enforcement efforts.

Chairman Ferguson’s directive specifically identified noncompete agreements among the employment practices warranting scrutiny, particularly when they unnecessarily restrict a former employee’s ability to find work within the same industry. Thus, while the new FTC leadership rejected the prior Commission’s attempt to ban noncompetes nationwide through rulemaking, it made clear that the agency would continue to examine particular noncompetes through its existing enforcement authority.

FTC Pursues Noncompetes on a Case-by-Case Basis

The FTC’s subsequent enforcement actions demonstrate this shift in approach. Rather than attempting to prohibit most employee noncompetes through a nationwide rule, the FTC is pursuing particular agreements that it believes improperly restrict workers and competition.

The FTC’s recent action against Rollins, Inc., one of the country’s largest pest-control companies and the parent company of Orkin, HomeTeam Pest Defense and Critter Control, illustrates the agency’s current approach.

In April 2026, the FTC alleged that Rollins imposed noncompete agreements on nearly all of its employees, including pest-control technicians, customer-service representatives and other relatively low-wage workers. According to the FTC, the agreements typically prohibited employees from working in the pest-control industry for two years after leaving Rollins and generally applied within a 75-mile radius of one of Rollins’ more than 700 locations nationwide.

According to the FTC, many of the agreements were not negotiated, employees typically received no additional consideration for them, and some employees had little opportunity to evaluate the restrictions before signing. The FTC also alleged that Rollins actively enforced its noncompetes through hundreds of cease-and-desist letters and multiple lawsuits.

The FTC contended that the restrictions harmed both workers and competition by limiting the employees’ ability to pursue other employment or establish competing businesses.

In June 2026, the FTC approved a final consent order requiring Rollins to stop enforcing covered noncompete agreements against more than 18,000 current and former employees. Rollins also must notify affected workers that they are no longer subject to the covered restrictions and may compete against Rollins, including by starting their own businesses.

FTC Warns Other Employers

The Rollins action was not limited to a single employer. The FTC also sent warning letters to 13 other companies in the pest-control industry, urging them to review their employment agreements, including any noncompetes, to determine whether their restrictions comply with the law.

Rollins also was not the FTC’s first noncompete enforcement action under its new leadership. In September 2025, the FTC took action against Gateway Services, Inc., a pet-cremation company that the FTC alleged imposed noncompetes on nearly all of its employees. The FTC subsequently entered a final order prohibiting Gateway from enforcing the covered noncompetes, freeing nearly 1,800 employees from the restrictions.

These actions make clear that the demise of the nationwide Noncompete Rule did not end federal scrutiny of employee noncompetes.

What Does This Mean for Employers?

The fact that the FTC’s nationwide Noncompete Rule has been vacated does not give employers a green light to use noncompetes without restriction.

The FTC’s current approach is significantly different from the 2024 Rule. Rather than treating most employee noncompetes as categorically unlawful, the agency is examining particular agreements and the circumstances in which they are imposed and enforced.

The Rollins action suggests several circumstances that may increase regulatory scrutiny, including noncompetes that:

• are imposed broadly on employees without regard to their position or access to confidential information, trade secrets or customer relationships;

• apply to lower-wage workers;

• contain lengthy or geographically broad restrictions;

• are imposed without meaningful negotiation;

• are required without additional compensation or other consideration; or

• are aggressively enforced against former employees.

  
  

This does not mean that any one of these factors automatically makes a noncompete unlawful. It does mean that employers should consider whether the scope of a noncompete is justified by the employer’s legitimate business interests and whether a narrower restriction could provide adequate protection.

State Law Still Matters

With the nationwide FTC Rule no longer in effect, state law remains critically important in determining whether a particular noncompete is enforceable.

In New Jersey, courts generally enforce restrictive covenants only to the extent they protect an employer’s legitimate interests, do not impose an undue hardship on the employee and are not injurious to the public. The restriction also must be reasonable in its duration, geographic reach and scope.

New York similarly subjects employee noncompetes to a reasonableness analysis and generally requires that restrictions be no broader than necessary to protect an employer’s legitimate interests. Certain New York courts also consider the reason for an employee’s termination with a growing trend toward not enforcing noncompete clauses where employees are terminated involuntarily without cause.

Employers operating in multiple states face additional complications because state laws governing noncompetes vary considerably, with some states prohibiting them in many or most employment relationships.

The Bottom Line

The FTC’s attempt to impose a nationwide ban on employee noncompetes is over. But federal scrutiny of noncompetes is not.

The current FTC has chosen a different enforcement strategy: targeting particular noncompete agreements that it believes improperly restrict workers and competition. The creation of the Joint Labor Task Force and the FTC’s subsequent enforcement actions confirm that restrictive employment agreements remain an area of federal enforcement activity.

Employers should therefore continue to review their restrictive covenants carefully and consider whether each restriction is reasonably tailored to protect a legitimate business interest. In many situations, narrower protections—such as confidentiality, trade-secret, customer nonsolicitation or employee nonsolicitation provisions—may adequately protect the employer’s interests without the additional legal and regulatory risks presented by a broad noncompete.

Employers and executives with questions about noncompetition agreements and other restrictive covenants should consult experienced counsel. Fellig Schwartz, LLC counsels businesses and management throughout New York and New Jersey on employment law compliance, hiring practices, workplace policies, and employment disputes.

About the Author

Audra Schwartz is a partner at Fellig Schwartz, LLC, where she advises businesses and management on employment law compliance, workplace policies, restrictive covenant disputes, compensation issues, and business litigation matters throughout New York and New Jersey. She counsels employers on hiring practices, wage and hour issues, employee separations, discrimination and retaliation claims, and employment agreements.

This article is for informational purposes only and does not constitute legal advice nor does it create an attorney client relationship. Employers with questions about New Jersey, New York and Federal employment laws should consult employment counsel.