"FTC staff has reviewed public materials from your client's lawsuit seeking to enforce a noncompete agreement against a former worker and the competitor who hired her. These materials indicate that Mortgage Connect may have broadly deployed unjustifiable noncompete agreements in employment contracts with potential adverse effects on workers and competition."
"According to Ferguson, evidence in the legal case suggests that Mortgage Connect requires all of its employees to sign noncompetes without regard to the employee's role or responsibilities. But such blanket restrictions can burden workers, as well as smaller and new competitors, he added."
"Ferguson also questioned whether the company's stated reasons for using noncompetes (including the protection of confidential information, goodwill, reputation and employees' specialized skills) could instead be addressed through less restrictive tools for example, with nonsolicitation and nondisclosure agreements. The court filings indicate Mortgage Connect already relies on these narrower restraints and that the employee at issue did not receive specialized training, the letter read."
"The FTC did not take a position on the merits of the lawsuit and did not declare Mortgage Connect in violation of the law."
The Federal Trade Commission warned Mortgage Connect about its use of noncompete agreements in employment contracts. The FTC urged the company to review and potentially discontinue restrictive covenants that may violate federal antitrust law. The warning followed public information from litigation in Pennsylvania state court involving enforcement of a noncompete against a former worker and a competitor who hired her. FTC staff reviewed public materials and indicated Mortgage Connect may have broadly required noncompetes for all employees regardless of role. The FTC questioned whether the company’s justifications, such as protecting confidential information, goodwill, reputation, and specialized skills, could be addressed with less restrictive alternatives like nonsolicitation and nondisclosure agreements. The FTC did not take a position on the merits of the lawsuit.
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