Two years ago, the Federal Trade Commission announced that it would seek to categorically ban almost all non-compete agreements. As drafted, the FTC’s proposed rule would have crippled businesses across the country. So when the FTC formally published its proposed rule on May 7, 2024, businesses and interest groups across the country filed lawsuits almost immediately. Months of litigation ensued. Ultimately, the FTC agreed to abandon its blanket approach and instead, pursue enforcement of anticompetitive employment practices on a case-by-case basis. Below is a lookback at the past two years and what it means for businesses and employees.

The FTC’s April 2024 Proposed Non-Compete Ban

In April 2024, the Federal Trade Commission announced its intent to ban non-compete clauses nationwide through rulemaking. The FTC followed through with its announcement and formally published the “Final Rule” on May 7, 2024. The FTC claimed its goal was to provide an institutional fix to labor mobility and wage growth. In its proposal, the FTC framed non-competes not merely as private contracts, but as unlawful restraints on trade. That announcement took the business world by storm, with lawyers and businesspeople alike scrambling to decipher what the proposed rulemaking meant for them – whether they were looking to enforce non-competes or get out from underneath them.

Businesses Take the Fight to the Courts and Prevail

Soon thereafter, the courts got involved. In the Northern District of Texas, Ryan LLC (a Dallas-based tax services firm) sued the FTC seeking to invalidate the proposed ban that was set to take effect in September 2024.[1] In an August 24, 2024 ruling, United States District Judge Ada Brown struck down the ban and held that it shall not be enforced or take effect.[2] The court stating that such a “sweeping prohibition [against non-competes]…renders the Rule arbitrary and capricious.” Although there was additional litigation pending across the country on the topic, Judge Ada Brown’s ruling effectively paused the FTC’s one-size-fits-all solution and underscored the need for clearer statutory authorization and due-process safeguards.

Down but Not Out, the FTC Proceeds with Case-by-Case Enforcement

With the court’s pushback in view, the FTC recalibrated its tactics. Rather than pursuing a broad rule in a single, decisive stroke, the agency initiated a more targeted, case-by-case enforcement posture. Accordingly, on September 4, 2025, the FTC announced an enforcement action against Gateway Services, Inc., a nationwide pet cremation services company.[3] In that action, the FTC took issue with Gateway’s lack of particularity when it came to the language and scope of Gateway’s non-compete agreements. The FTC alleged that Gateway’s generic non-compete agreements did not distinguish between highly compensated executives and hourly workers like facility-level laborers. The result? A consent order through which Gateway would cease using non-compete agreements in certain scenarios and a mandate that Gateway inform certain employees that their non-compete agreements were null and void.[4] This enforcement action illustrates the FTC’s targeted approach in lieu of sweeping rulemaking.

More recently, the FTC brought an enforcement action on April 15, 2026, against Rollins, Inc., the parent company behind a pest-control network with 18,000 nationwide employees.[5] In this complaint—practically mirroring the allegations in its action against Gateway Services—the FTC again took issue with a company’s practice of using standardized non-compete agreements for a wide variety of employees. Specifically, the FTC alleged that Rollins forced a significant number of its 18,000 employees to sign non-compete agreements that (a) were effective for two years after termination, and (b) restricted the employee from providing similar services within a 75-mile radius from the area in which that employee provided services for Rollins. According to the FTC, Rollins had previously sued its own pest-control technicians (who largely could not afford to fight Rollins in court) to enforce the overly broad non-compete agreements. The FTC’s action against Rollins illustrates how far it is willing to push its enforcement theory against large employers. Rollins has not yet responded, but given the facts alleged, it would be surprising if Rollins did not want to work out a deal with the FTC.

Practical Effect and Key Takeaways

Over this two-year window, a lot has changed. Numerous courts have weighed in, and the outcomes are fairly consistent: non-competes must be reasonable and tailored to the employee that the agreement seeks to restrict. Below are a few tips and considerations for both employers and employees:

For employers:

Take the time to tailor your non-compete agreements. While certain state laws might give a court the ability to “blue-pencil” your overly broad agreements, you might also lose key protections. For example, in Texas, if a court reforms an agreement, the employer cannot recover attorneys’ fees or actual damages.

Be precise and reasonable with the geographic and temporal limitations. Although it is tempting to be as restrictive as possible, courts are most willing to enforce your non-competes if they are reasonable. If you employ a factory-line type worker, there is no need to restrict them from similar work for two years and within 75 miles. And courts will certainly not appreciate your attempt at doing so.

For employees:

Do not be afraid to negotiate. It is incredibly easy to sign whatever a new employer puts in front of you. At that point in time, you are not thinking about leaving the company. You would be well served, however, to ask your employer for a few days to review the agreement. Review it with a critical eye and contact a lawyer. It will pay dividends if you end up leaving your employer to work for a competitor.

Employees should not assume that FTC action alone will invalidate their non‑compete agreements. After the 2024 proposed rule, so many people thought that they were free and clear of their non-compete agreements. That was not the case. And in fact, courts across the country will generally enforce a narrowly tailored and reasonable non-compete agreement. Treat your non-compete as if it will be enforced (which further underscores the importance of negotiating it on the front end).

Looking ahead, the lessons are clear. Large-scale employers can expect the FTC to continue its targeted enforcement of non-competes. Just like the courts, the FTC wants to see that the non-competes are reasonable, tailored, and have a legitimate business justification.

If you are an employer or employee with questions about your restrictive covenants—whether those are non-competes, non-solicitations, or otherwise—the attorneys at Gray Reed routinely help clients draft and litigate these matters.

References:

[1] Ryan LLC v. Federal Trade Commission, Civil Action No. 3:24-CV-00986-E, previously pending before the United States District Court for the Northern District of Texas.

[2] ryan_llc_v_federal_trade_commission_ruling_usdc_texas_northern.pdf

[3] Gateway-Complaint.pdf

[4] Gateway-DecisionOrder.pdf

[5] 2510011rollinscomplaint.pdf

[6] FY 2026-2030 Strategic Plan