Noncompete agreements remain one of the most closely watched issues in employment law. Although the Federal Trade Commission’s nationwide rule restricting most noncompete agreements was blocked by a federal court in 2024 and is not currently in effect, the FTC has continued to pursue individual enforcement actions involving noncompete agreements it believes may unlawfully restrict competition.
The FTC’s approach has shifted from seeking a broad nationwide prohibition to challenging specific agreements and employer practices on a case-by-case basis. Employers should understand that the absence of a nationwide ban does not mean all noncompete agreements are immune from scrutiny.
Most recently, the FTC finalized an order involving Rollins Inc., the parent company of Orkin, requiring the company to stop enforcing noncompete agreements against more than 18,000 employees. According to the FTC’s allegations, the agreements applied to a wide range of workers, not just executives, and restricted employees’ ability to pursue certain job opportunities.
What Does This Mean for Employers?
Although there is currently no nationwide ban on noncompete agreements, employers should not assume that all restrictive covenants are enforceable or free from regulatory review.
The FTC continues to examine whether particular noncompete agreements may be overly broad or unnecessarily restrict employee mobility in violation of antitrust laws. The agency has also taken action against specific employers and issued warning letters in certain industries, signaling that it intends to continue reviewing agreements that it believes improperly limit competition.
Now Is the Time to Review Employment Agreements
Employers should consider reviewing their employment agreements to determine whether:
- Noncompete provisions are narrowly tailored to protect legitimate business interests.
- Restrictions are reasonable in duration, geographic scope, and the employees covered.
- The agreement protects legitimate interests such as trade secrets, confidential information, customer relationships, or specialized training investments rather than simply preventing competition.
- Alternative protections, including confidentiality, trade secret, or non-solicitation agreements, may better accomplish the company’s goals.
State law continues to play a significant role in determining whether restrictive covenants are enforceable. Many states have enacted their own limitations or restrictions on noncompete agreements, including rules based on employee compensation, job duties, and industry. Employers operating in multiple states should ensure their agreements comply with the requirements of each applicable jurisdiction.
Key Takeaway
The legal landscape surrounding noncompete agreements continues to evolve. While the FTC’s nationwide rule is not currently in effect, federal enforcement efforts have shifted toward challenging specific employers and agreements that the agency believes may unlawfully restrict competition.
Employers should take this opportunity to review existing employment agreements and ensure that restrictive covenants are carefully drafted, appropriately limited, and compliant with current federal and state law.
Need Assistance Reviewing Your Employment Agreements?
As the legal landscape surrounding noncompete agreements continues to change, employers should take a proactive approach to reviewing employment contracts and restrictive covenant provisions. A carefully drafted agreement can help protect your business while reducing the risk of legal challenges.
If you have questions about noncompete agreements, confidentiality provisions, or other employment policies, the attorneys at Hardin Thompson PC can help. Our Employment Law team advises employers on developing compliant workplace policies and navigating changing federal and state employment laws.
Contact Hardin Thompson PC today to schedule a consultation and ensure your employment agreements are designed to protect your business while remaining compliant with current legal requirements.