FTC Steps Up Noncompete Cases After Losing Its Ban

Many employers relaxed when a federal court in Texas blocked the Federal Trade Commission's nationwide noncompete ban in August 2024. The agency later withdrew its defense of the rule. A year later, it is clear that the ban's demise did not end federal scrutiny of noncompete agreements. It changed the method.

From rulemaking to enforcement

The FTC's broad noncompete rule would have barred most noncompete clauses nationwide. It never took effect. Under Chairman Andrew Ferguson, the commission abandoned the rule and turned instead to individual enforcement under Section 5 of the FTC Act, which prohibits unfair methods of competition.

In September 2025, Ferguson sent warning letters to several large health care employers and staffing firms. The letters said noncompetes may unreasonably limit employment options for nurses, physicians and other vital roles, particularly in rural areas where medical services are already stretched thin. Ferguson urged all employers, not only recipients, to review their contracts. We cover the staffing pressures in that sector in our hospital nurse turnover report.

In January 2026, the FTC hosted a public workshop on protecting workers from anticompetitive noncompete agreements. At the workshop, Ferguson urged employers to study the agency's consent orders to understand how it evaluates noncompete practices.

The Rollins order

By April 2026, the agency had moved from warnings to formal action at scale. The FTC ordered Rollins Inc., one of the largest pest-control companies in the country, to stop enforcing noncompete agreements against more than 18,000 employees nationwide. According to Business Law Today, the agreements imposed two-year, 75-mile restrictions. At the same time, the FTC sent warning letters to 13 other pest-control companies urging them to review their agreements.

Reed Smith noted that the Rollins action reached more than ten times as many employees as an earlier FTC order and extended the agency's reach across an entire industry. The common thread, according to multiple law firms, is that the FTC is targeting employers that apply noncompetes indiscriminately across their workforce rather than tailoring them to employees with access to genuine trade secrets.

Court filings as a trigger

In May 2026, the FTC sent a warning letter to Mortgage Connect, a Pennsylvania mortgage company, after reviewing material made public in a state court case in which the company was seeking to enforce a noncompete against a former employee. Foley and Lardner observed that FTC staff may review public court dockets to identify employers using overly broad noncompetes.

That creates a new calculation. Before suing a former employee, an employer should consider whether the lawsuit could expose its broader noncompete practices to federal review. Bloomberg Law described the act of enforcement itself as a potential predicate for scrutiny.

The pattern across these actions is consistent. Employers that require every worker to sign the same noncompete, regardless of role, seniority or access to sensitive information, face the most risk. Agreements that cover a sales executive with deep customer relationships are judged very differently from identical language applied to a technician, a receptionist or a seasonal laborer.

State law still matters

The FTC's actions sit on top of state noncompete law, which varies widely. Some states ban most noncompetes, some restrict them for workers below certain income levels, and others enforce agreements that are reasonable in scope, duration and geography. Kentucky courts generally evaluate noncompetes for reasonableness, and employers should have agreements reviewed by counsel familiar with the state's case law.

What employers should do now

Law firms tracking the FTC's actions recommend a consistent set of steps. Audit every noncompete in use, including templates in offer letters and handbooks. Identify which employees actually have access to trade secrets, confidential customer relationships or specialized training that justifies a restriction.

Remove noncompetes from hourly, entry level and customer-facing roles where they cannot be justified. Consider narrower alternatives such as confidentiality agreements, nonsolicitation clauses limited to customers the employee actually served, or reasonable notice periods for senior staff. Keep restrictions short and geographically narrow.

Finally, think carefully before enforcing. Ask whether the former employee is actually using confidential information or simply working for a competitor. Litigation that looks punitive could draw attention the employer does not want.

Noncompetes also affect recruiting. Candidates increasingly ask about restrictive covenants before accepting offers, and broad restrictions can turn away the experienced workers an employer most wants. Our report on employer brand and hiring costs explains why candidate perceptions matter. Employers reviewing agreements should also check classification of contract workers, covered in our contractor rule report.