FTC Takes Renewed Aim at Blanket Noncompetes: What it Means for Employers

The Federal Trade Commission (FTC) took a strong step against restrictive post-employment covenants by filing an administrative complaint against the parent company of several national pest control brands. The action, which targets the company’s longstanding use of companywide noncompete agreements, signals a continued focus by the FTC on employment practices as a form of competition regulation. And it provides an important compliance roadmap for employers well beyond the pest control industry.

This latest move comes after a federal court in Texas in August 2024 struck down an earlier FTC rule. The rule would have barred employers nationwide from entering into noncompetes with workers and would have required that existing noncompete agreements be rescinded. In the court’s 2024 ruling, it held that the FTC exceeded its statutory authority and that the rule was arbitrary and capricious. 

The FTC’s Claims

According to the FTC’s complaint, the pest control company required virtually all newly hired employees — more than 18,000 nationwide — to sign noncompete agreements, regardless of role, seniority or access to confidential information. The agreements generally prohibited employees from working in the pest control industry for two years after termination within a 75-mile radius of their former work location. In some cases, the agreements covered an even broader geographic area.

The FTC alleges that these agreements were imposed on front-line workers such as pest control technicians and customer service representatives, many of whom earned relatively low wages and lacked bargaining power. Employees reportedly received no additional compensation for signing the agreements and often had little time or opportunity to review them. In some instances, employees were asked to sign noncompetes in the field following corporate acquisitions and were led to believe their jobs depended on compliance.

When employees left, the FTC claims the company enforced the agreements aggressively — sending hundreds of cease-and-desist letters and filing multiple lawsuits against former employees. The FTC asserts that this enforcement strategy exacerbated the anticompetitive effects by deterring workers from pursuing alternative employment or starting competing businesses.

Enforcement Under Section 5 of the FTC Act

Rather than relying on state noncompete law, the FTC charged the company with violating Section 5 of the Federal Trade Commission Act, which prohibits “unfair methods of competition.” The commission’s theory is that the blanket noncompete policy distorted labor market competition by suppressing employee mobility, restricting entry by competitors, and reducing wage and benefit competition.

Notably, the FTC emphasized that the agreements altered employees’ bargaining position even during employment, making it more difficult to negotiate better compensation or working conditions because the cost of leaving was artificially high.

Why the FTC Rejected the Company’s Justifications

The complaint carefully dismantles the traditional defenses employers often raise to justify noncompetes:

• Confidential information – The FTC found that the company’s pest control methods were publicly available through its website and online videos, undermining any claim that employees possessed unique, proprietary knowledge requiring noncompete protection.
• Customer relationships – The commission concluded that narrowly tailored nonsolicitation agreements would adequately protect customer goodwill without broadly restricting where employees could work.
• Training investments – According to the FTC, the company’s investments in employee training did not depend on noncompetes, noting that the company provides similar training even in jurisdictions where noncompetes are not used or enforced.

In short, the FTC concluded that any legitimate business interests could have been protected through significantly less restrictive means.

The Proposed Consent Order

The FTC simultaneously announced a proposed consent order — open to public comment — that would:

• Prohibit the company from entering into or enforcing noncompete agreements for nearly all employees
• Require the company to notify current and former employees that their existing noncompetes are void and unenforceable
• Preserve a narrow carve-out for certain senior executives eligible for equity grants

The pest control company did not admit liability as part of the proposed settlement. Public comments will be accepted for 30 days before the order becomes final.

Why This Action Matters

This dispute illustrates what the FTC views as high-risk features of noncompetes:

• Blanket, one-size-fits-all policies
• Lack of individualized analysis by role
• Application to low-wage or front-line employees
• Absence of meaningful consideration
• Reliance on generic “confidential information” justifications

The FTC made clear that applying identical restrictions to a pest control technician and a senior executive signals a lack of tailoring, which undermines any procompetitive justification.

Practical Takeaways for Employers

This latest FTC action offers several practical lessons:

1. Noncompetes must be role specific.

• Employers should be able to articulate precisely why a particular employee needs a noncompete. Access to genuinely confidential, non-public information matters.

2. Nonsolicitation agreements are the safer default.

• The FTC explicitly identified nonsolicitation provisions as a less restrictive alternative that can protect customer relationships without triggering the same antitrust concerns.

3. Tiered restrictive covenant structures reduce risk.

• Using different agreements based on job function, seniority and access to sensitive information is far more defensible than a uniform approach.

4. Documentation matters.

• Employers should be prepared to show why less restrictive alternatives would be insufficient for specific roles.

The Bigger Picture

This latest complaint fits squarely within the FTC’s broader enforcement strategy targeting labor market restraints as anticompetitive conduct. Even as the legal status of broader federal noncompete bans remains unsettled, this case underscores a key reality: the FTC does not need a rule to challenge noncompetes it views as overbroad or unjustified.

For employers, the message is clear. The question is no longer whether noncompetes are enforceable under state law alone, but whether they can withstand federal antitrust scrutiny when applied at scale.

Contact Mark Fijman or any member of the Phelps labor and employment team with questions or for advice and guidance.