The Federal Trade Commission has made clear that the withdrawal of its categorical noncompete rule does not signal a retreat from federal scrutiny of restrictive employment agreements. In a recent enforcement action, the FTC ordered Rollins, Inc., one of the largest pest-control companies in the United States, to cease enforcing noncompete agreements against more than 18,000 employees nationwide. The agency simultaneously issued warning letters to 13 other companies in the pest-control industry, signaling that enforcement priorities now extend across entire sectors rather than focusing on isolated employers.
This development follows the February 2026 removal of the FTC's categorical noncompete rule from federal regulations. Rather than abandoning oversight, the Commission has pivoted to a case-by-case enforcement model grounded in Section 5 of the FTC Act, which prohibits unfair methods of competition. Under this framework, individual noncompete agreements can still trigger federal action, even in the absence of a blanket prohibition. Employers who assumed that the rule's withdrawal eliminated federal exposure should reassess that position, particularly where restrictive covenants are applied broadly to non-executive or lower-wage workers whose mobility may be considered disproportionately constrained.
The FTC's 2026-2030 strategic plan reinforces this trajectory. The Commission has identified noncompete, no-poach, and wage-fixing agreements as continuing areas of scrutiny, indicating that labor-market restraints will remain an enforcement priority for the foreseeable future. The Rollins action illustrates how the agency can leverage Section 5 to compel large-scale cessation of noncompete enforcement, with reputational and operational consequences for affected employers.
In light of these developments, employers should conduct a careful audit of existing restrictive covenants. Areas warranting particular attention include the geographic and temporal scope of noncompetes, the classification of workers subject to them, and whether the agreements are supported by a legitimate competitive justification proportionate to the position held. Companies operating in industries with workforce mobility patterns similar to those identified by the FTC should be especially proactive, as warning letters and orders can extend beyond the initial target.
This article is provided for general informational purposes only. Clients should consult counsel for advice tailored to their specific circumstances and jurisdictions.