Significant 2026 Developments in Employee Mobility and Restrictive Covenant Law

The first half of 2026 reflected significant changes in employee mobility and restrictive covenant law. Instead of its now-withdrawn nationwide ban on non-competes, the FTC is taking targeted, case-by-case enforcement actions against overbroad, "cookie cutter" restrictions that apply to an employer's entire work force, regardless of legitimate need. New York scaled back its Trapped at Work Act while further restrictions on non-competes continue to percolate in New York's legislature. This is consistent with a continuing nationwide trend to limit restrictive covenants particularly for lower-wage workers, underscoring the importance of employers ensuring their restrictive covenant agreements and enforcement strategies stay in step with current law.

Federal Trade Commission Developments

Although it withdrew its proposed nationwide ban on non-competes in September 2025, the FTC made clear that it intends to challenge overbroad restrictive covenants through targeted enforcement actions. Through the first half of this year, the FTC has reinforced that position with public statements, warning letters, consent orders, and a workshop focused on employee non-competes.

For example, in February, the FTC finalized a consent order requiring building services contractor Adamas Amenity Services LLC and its affiliated businesses to cease enforcing no-hire agreements that restricted employee mobility among competitors and limited customers' ability to change service providers. According to the FTC, the agreements unlawfully suppressed competition for workers without serving legitimate business interests.

More recently, in June, the FTC finalized a consent order resolving an enforcement action against Rollins, Inc., one of the nation's largest pest-control companies. The FTC alleged that Rollins' non-compete agreements, which applied to more than 18,000 employees across all job categories, including many lower-wage workers, were anticompetitive. The agreements prohibited employees from working in the pest-control industry for two years, often within a 75-mile radius from one of Rollins' more than 700 locations. According to the FTC, employees received no additional consideration for signing the agreements, were not given a meaningful opportunity to review them, and Rollins routinely enforced the restrictions through cease-and-desist letters and litigation. Under the consent order, Rollins agreed to discontinue enforcement of the non-compete agreements.

The FTC also issued warning letters to thirteen additional pest-control companies asking them to review their employee agreements for anticompetitive non-competes.

Employers should continue reviewing their restrictive covenant agreements to ensure they are reasonably tailored to protect legitimate business interests and comply with applicable state law.

New York Developments

New York lawmakers continued to refine the state's approach to employee mobility in the first half of 2026.

In February, the Legislature substantially amended the Trapped at Work Act, which prohibits employers from requiring departing employees to repay training and other costs as a condition of employment, in response to concerns raised by employers. While preserving the Act's central goal of prohibiting "stay-or-pay" agreements that effectively lock employees into their jobs, the amendments significantly narrow the law's scope. Among other changes, the Legislature delayed the Act's effective date until December 19, 2026, clarified that the law applies only to traditional employer-employee relationships, expanded the exception for reimbursement of qualifying educational expenses, and created a new exception permitting repayment obligations for bonuses, relocation assistance, and other non-educational incentives.

Separately, in April, Senate Bill S9759 was introduced, which would largely prohibit employers from entering into or enforcing non-compete agreements with most New York employees, including healthcare professionals, while exempting individuals earning at least $500,000 annually. The bill would preserve employers' ability to use confidentiality agreements, trade secret protections, and customer non-solicitation provisions, establish strict requirements for any enforceable non-compete agreements, and create a private right of action allowing employees to challenge prohibited agreements. This bill, which is prospective only, is narrower than the legislation that Governor Hochul vetoed on December 22, 2023. The Senate Bill passed on June 3 and was delivered to the New York Assembly, where it was referred to the Assembly Labor Committee. However, the bill did not advance to a vote before the end of the 2026 legislative session and would need to be reintroduced in a future legislative session to move forward.

Other State Developments

Delaware
In April, the Delaware Supreme Court reversed the dismissal of Payscale, Inc.'s breach of contract claims arising from a former employee's alleged violations of the noncompete, non-solicitation, and confidentiality provisions contained in the incentive equity agreement that she signed as an employee. The decision reinforces several important principles. First, nationwide non-compete agreements with an 18-month duration may be enforceable when appropriately tailored to protect legitimate business interests. Second, contingent equity awards can constitute sufficient consideration to support restrictive covenants. Third, employers may rely on circumstantial allegations to plead claims for breaches of non-solicitation and confidentiality obligations. The Delaware Supreme Court declined to adopt a bright-line rule that nationwide employment non-competes are facially unenforceable, preserving flexibility for employers seeking to protect legitimate competitive interests through carefully drafted agreements.

Tennessee
Effective July 1, 2026, non-compete agreements for employees earning less than $70,000 annually will be prohibited. Tennessee's statute also establishes a tiered framework for evaluating whether the duration of a restrictive covenant is reasonable. The law does not prohibit employers from enforcing confidentiality or non-solicitation agreements that otherwise satisfy applicable state-law requirements.

Washington
In March, Washington enacted one of the nation's most restrictive non-compete laws, effectively prohibiting non-compete agreements between employers and employees and independent contractors. Beginning June 30, 2027, the law will apply retroactively to render nearly all existing non-compete agreements void and unenforceable, subject to limited exceptions, while continuing to permit confidentiality agreements, trade secret protections, and qualifying non-solicitation provisions within specified limits.

Virginia
Beginning July 1, 2026, Virginia law expands the state's restrictions on non-compete agreements by rendering them unenforceable against employees who are terminated without cause unless the employer provides severance benefits or other monetary compensation disclosed at the time the agreement is executed. The law applies prospectively only and does not affect non-compete agreements entered into, renewed, or modified before July 1, 2026.

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For more information about this issue or other employment matters, please contact:

John H. Chun at +1 212 592 1546 or [email protected]
Elizabeth A. Woods at +1 212 592 1585 or [email protected]
Carol M. Goodman at +1 212 592 1465 or [email protected]

© 2026 Herrick, Feinstein LLP. HERRICK® is a registered trademark of Herrick, Feinstein LLP. This alert is provided by Herrick, Feinstein LLP to keep its clients and other interested parties informed of current legal developments that may affect or otherwise be of interest to them. The information is not intended as legal advice or legal opinion and should not be construed as such.