The FTC fires another shot across the bow seeking to void non-compete agreements

In a truly unexpected turn of events, the Federal Trade Commission (“FTC”) just announced that they were going to gird their loins yet again and do battle against non-competition agreements. Now, when we first saw the headline “FTC Takes Action Against Noncompete Agreements,” we rightly rolled our eyes and kept right on scrolling. After all, administrative agencies have been on a 15+ year losing streak, with practically everything that the likes of the DOL, EEOC, and FTC have attempted to do in that time being summarily dismissed by the Eastern District of Texas. So, we initially saw this as just another “FTC Bans Noncompete Agr—Never mind, Texas Said No” headline we could safely ignore.

But it just kept coming up! So, we finally bit the bullet, clicked the link, and were shocked to see that – against all odds – this particular FTC action will not go away without another fight.  So, what’s the difference between this anti-noncompetition enforcement action and every other anti-noncompetition enforcement action that’s failed spectacularly in the past fifteen-plus years? Well, here’s an excerpt from ftc.gov’s own account of the events; see if you can spot it:

“The FTC’s action against Rollins—the parent company of brands including Orkin, HomeTeam, and Critter Control—is the latest in a series of enforcement actions taken by the Trump-Vance FTC to free American workers from labor practices that limit small business formation, employee mobility, and wage and job growth.”

We took the liberty of emboldening the dispositive phrase in that sentence for your convenience. This isn’t cynicism or snark, either, though we don’t blame long-time readers for assuming as much. No, the Sensenig Law Firm has just enough collective experience to understand that much of American governance was politicized circa November of 2008 - and the Texas courts’ handling of administrative actions since then has been emblematic of that process. 

But this begs the question as to why on earth a fanatically pro-employer administration would take any action whatsoever to reign in restrictive covenants. Well, we can’t say for sure, but that won’t stop us from speculating!  Our best guess is that even as we speak, Texas courts are standing by to quietly smother the FTC’s complaint at the pleading stage, allowing the “Trump-Vance FTC” to have its cake and eat it, too. The FTC gets to say that it tried its best for the American worker and blame its failure on “activist judges.” 

Now, astute readers are furrowing their brows and wondering It is 2026, people; all that seems to matter are the headlines. If it requires more than a Tweet – sorry, an “X” – to explain, the general public will just never learn about it. It’s really that simple. To this day, we get otherwise informed, savvy business-owners insisting to us that the FTC actually banned noncompetition agreements back in 2024 and incredulously asking how a labor and employment firm could possibly not have heard that. But of course, the FTC’s attempt to ban noncompetition agreements was summarily blocked by – you’ll never guess! – the Eastern District of Texas, so it never actually took effect. But “FTC Bans Noncompetition Agreements” is a homepage headline; “The Texas Court Blocks FTC” is a footnote buried behind multiple banner ads and paywalls, so people only remember the headline.

We suspect this particular FTC action will share a similar fate, despite being advanced by the “Trump-Vance FTC.” Because now that they’ve gotten their headline, whether they follow through or not may not be the end goal.  

All that said, we do have to hand it to the FTC on this one. As a labor and employment firm, we’ve written more than our fair share of restrictive covenants, up to and including noncompetition agreements, and we have to say that we are not huge fans of the traditional non-compete. A noncompetition clause is a blunt instrument, where a surgical approach is infinitely preferable. Enter…. drumroll please …. the non-solicitation clause.

As the FTC points out, a noncompetition agreement must be supported by a “legitimate business interest.” You might be surprised to learn that “I’d prefer not to have competition” is, in fact, not a legitimate business interest sufficient to support the enforcement of a noncompetition agreement. Put colloquially, the Court will ask how exactly what it is that is so special at your business that it will hurt your business if a former employee sets up shop across the street from you, as opposed to, say, any other person or entity. 

In most cases, the answer is “it doesn’t.” If a McDonald’s drive-thru employee jumps ship for the Burger King across the street, McDonald’s business does not suffer. Similarly, if pest control employees – the impetus for the FTC’s action – starts spraying poison for the company next door, Rollins Inc.’s business does not suffer. Just as nobody is going to McDonald’s to see their favorite drive-thru technician, nobody is ordering service from Rollins or creating a bug infestation just so they can visit with their favorite exterminator. 

On the other hand, if your star accountant hangs a shingle down the block from you, they might actually bring a substantial portion of your customers with them - in which case courts would look more favorably on your attempts to enforce a noncompetition clause. But even in this case, a noncompetition clause begs the question: why not use a non-solicitation clause instead?

A non-solicitation clause effectively skips the “legitimate business interest” analysis altogether. If you opt for a noncompetition clause – even in our accountant example – you run the risk of the court declaring that your restrictive covenant is overbroad, and therefore unenforceable. This will almost never happen with a non-solicitation clause, which clause will protect your valuable client base every bit as well – and much more reliably – than a noncompetition clause. 

And as for confidential and trade secret-protected information? You can protect that just as readily with a non-solicitation clause, or by simply utilizing the Florida Uniform Trade Secrets Act (“FUTSA”). There’s just no reason to opt for the blunt instrument of a non-compete agreement when a non-solicitation agreement would accomplish each and all of your goals with substantially less hassle.

That said, noncompetition agreements do have their place. We just don’t feel that they should be the default option that many business owners seek out. If you need a restrictive covenant – be it a noncompetition, non-solicitation, or even a no contact clause – we’ve got you covered and are here to help.