The federal landscape for noncompete agreements has shifted meaningfully in 2026, and employers relying on restrictive covenants should take note. In February 2026, the Federal…
The federal landscape for noncompete agreements has shifted meaningfully in 2026, and employers relying on restrictive covenants should take note. In February 2026, the Federal Trade Commission's 2024 nationwide noncompete ban was formally removed from the Code of Federal Regulations, returning primary authority over enforceability to state law. That change does not, however, signal the end of federal interest in noncompete practices. Instead, the Commission has redirected its efforts from broad rulemaking toward targeted, case-by-case enforcement under Section 5 of the FTC Act.
The most prominent example of that new posture came on June 22, 2026, when the FTC approved a final consent order barring Rollins, the parent company of Orkin, from enforcing noncompete agreements against approximately 18,000 workers. Alongside that action, the Commission issued warning letters to 13 other pest-control firms, signaling that the Rollins order should be read as a template rather than an isolated event. The message to employers is clear: even without a nationwide rule, federal scrutiny of noncompetes remains active, and it is now being applied employer by employer.
For U.S. companies, this fragmented environment creates real compliance complexity. State law now governs whether a given noncompete is enforceable, and those standards vary widely, from outright prohibitions to relatively permissive frameworks. Layered on top of that patchwork is the possibility of a Section 5 investigation where the Commission views a company's practices as an unfair method of competition. Industries with large hourly or lower-wage workforces, broad use of standardized restrictive covenants, or recent enforcement attention, such as the pest-control sector highlighted in the Rollins matter, warrant particular caution.
Proactive review is the sensible response. Employers should consider auditing existing workforce agreements, identifying which categories of employees are subject to noncompetes, assessing enforceability under applicable state law, and evaluating whether narrower tools such as confidentiality provisions or tailored nonsolicitation clauses would achieve the intended business objectives with less legal exposure. Documentation of the business justification for any remaining restrictions is increasingly important.
This newsletter is provided for general informational purposes only and does not constitute legal advice. Clients should consult counsel for guidance tailored to their specific workforce, jurisdiction, and business circumstances.