FTC Takes Actions Against Employer Noncompete Agreements

The U.S. Federal Trade Commission (FTC) on Wednesday, April 15, took a strong step against employer-mandated restrictive covenants, ordering one of the nation’s largest pest control companies to immediately stop enforcing noncompete agreements against its more than 18,000 employees nationwide.

The enforcement action against Rollins Inc., the parent company of major brands such as Orkin, HomeTeam and Critter Control, is a visible step by the agency to eliminate “unfair and anticompetitive” contracts that officials say stifle small business formation, limit worker mobility and suppress wages.

Beyond the order against Rollins, the FTC issued warning letters to 13 additional companies in the pest control industry. The agency urged these firms — which employ thousands of workers — to avoid similar repercussions by reviewing their own employment agreements to ensure they do not contain anticompetitive provisions.

Restrictive Terms Found to Be Overly Broad and Unfair

According to the FTC in its four-page complaint document, Rollins imposed noncompete agreements on nearly all its staff, regardless of their role or seniority. This included not only managers but pest control technicians, customer service representatives and other employees earning relatively low wages. These agreements typically barred former employees from working in the pest control industry for two years after leaving the company.

The restrictions were geographically broad, often prohibiting workers from seeking employment within a 75-mile radius of any of Rollins’ more than 700 U.S. locations. The FTC argued these terms:

• Denied workers access to job opportunities;
• Restricted worker mobility;
• Likely resulted in lower wages and salaries, reduced benefits, less favorable working conditions and personal hardship; and,
• Prevented workers from starting their own competing businesses.

What the FTC Order Requires

Under the proposed settlement, Rollins must:

• Stop enforcement (cease applying noncompete restrictions to thousands of current and former workers);
• Notify employees (formally inform current and former staff in writing that they are no longer bound by these agreements and are free to compete, including by launching their own firms); and,
• Future compliance (refrain from entering into new noncompetes with employees who are not senior leaders).

According to the FTC release, Rollins had already begun eliminating the use and enforcement of these agreements for nearly all employees last year, aiming to maintain employees’ ability to seek employment elsewhere while still protecting proprietary data.

“The American economy runs best when workers are not limited by noncompete agreements that distort competition and prevent workers from changing jobs, starting competing businesses and earning higher wages.” said Daniel Guarnera, the director of the FTC’s Bureau of Competition. “The FTC’s actions today build on its work to enforce the antitrust laws to protect American workers.”

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