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In April, the U.S. Federal Trade Commission (FTC) issued a sweeping rule banning nearly all non-compete agreements. It applies to the vast majority of American workers — including those in pest management — and requires employers to notify existing employees that prior agreements are no longer enforceable. The FTC’s rationale is that non-compete agreements suppress wages, stifle innovation and limit worker mobility.
The concern is familiar: A technician spends years building customer relationships, then either walks out the door to a competitor or starts their own operation. Non-compete agreements were the go-to protection. Now they’re gone. But in reality, they were never as powerful as owners hoped. Enforcement meant attorneys, court costs and months of litigation. And even when you won, the employee rarely had assets to collect. You got a judgment on paper and a bill for legal fees in real life.
A different kind of defense
Some operators abandoned non-compete agreements long ago in favor of customer assignment agreements, and they’re better positioned for this moment as a result. The concept is straightforward: Rather than restricting where an employee can work, you attach a dollar value to any customers they take with them.
For example, if your departing employee, Tom, services any of your customers within a defined period, he must purchase those accounts at five times the annual service value. If Tom walks away with $20,000 in recurring revenue, he owes you $100,000. That’s a real deterrent, but it doesn’t bar Tom from his livelihood — which is exactly why courts are more willing to uphold it. Plus, if it ends up in litigation, the damages already are written into the contract.
Other protection options
The FTC rule doesn’t touch non-solicitation agreements (NSAs) or non-disclosure agreements (NDAs), and both remain valuable. An NSA prevents a former employee from poaching your customers or staff. An NDA protects proprietary information such as pricing, customer data and treatment protocols. Neither restricts employment, which makes both far more defensible in court than a non-compete agreement ever was.
The era of using legal restrictions to hold onto employees is over. The operators who thrive are those building companies at which people actually want to stay. That was always the better play. Now it’s the only one.
Return to our non-compete strategy page
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