Labor & Employment Law Daily Wrap Up, LITIGATION NEWS, TRENDS—Mortgage service provider that sued former employee to enforce a noncompete agreement finds itself in FTC crosshairs, (May 11, 2026)

By Brandi O. Brown, J.D.

“Available information about Mortgage Connect’s use of noncompete agreements raises significant competitive concerns,” the FTC Chairman wrote in a letter to their attorney.

On Friday, FTC Chairman Andrew Ferguson sent a warning letter to the legal team representing Mortgage Connect, a national mortgage services provider, in its lawsuit against a former employee, wherein the former employer seeks to enforce a noncompete agreement against that employee and her new employer.

Information in the lawsuit appears to show that Mortgage Connect may have used unjustifiable noncompete agreements in employment contracts, with potential adverse effects on workers and competition, the Chairman’s letter explains. It encourages the company to review and discontinue the use of any noncompete or other agreements that are not reasonably necessary.

The FTC Chairman notes that as part of a recent general solicitation of comments, it has “received submissions from market participants—including in the mortgage services industry—raising concerns that many noncompete agreements tend to limit competition and unfairly harm workers.”

Information from litigation. Regarding Mortgage Connect, the Chairman notes that information made available recently based on a lawsuit brought by the mortgage company against a former employee indicate that it “may have broadly deployed unjustifiable noncompete agreements in employment contracts with potential adverse effects on workers and competition.”

The Chairman writes that evidence introduced in that lawsuit appears to show that the employer requires all employees to sign noncompete agreements without regard to their role or responsibilities. “Aside from unfairly burdening workers,” the Chairman explains, “this practice may have the effect of depriving smaller competitors and new entrants from hiring workers with relevant experience who could enable them to compete against Mortgage Connect.”

Less restrictive means. The letter explains that “at least some of” the employer’s aims for using and enforcing those agreements could be achieved through less restrictive means. For example, it notes that the filings suggest that the employer already uses narrower restraints, such as non-solicitation and non-disclosure agreements, that could address the risk of harm to client goodwill and confidential information disclosure. And, regarding another identified aim—the protection of specialized skills it provides—the Chairman explains that the court filings raised questions about whether the employer’s noncompete agreements in this instance “promote its use of, or investment in, specialized training,” particularly as it appeared that the employee involved in this lawsuit did not receive that training.

While noting that the FTC was not taking a position on the merits of the employer’s claim in this lawsuit and that the letter was “not intended to be a comprehensive statement of concerns that may exist in connection with noncompete agreements or other post-employment restraints,” nor “intended to suggest that a determination has been made that Mortgage Connect has engaged in illegal conduct,” it still recommends that the employer “conduct a comprehensive review of its employment contracts” for legal compliance and appropriate tailoring.

News: AgencyNews LitigationNewsTrends ContractClaims