FTC Warning Letter Highlights New Risks for Employers That Seek to Enforce Noncompete Agreements in Court

On May 8, 2026, Federal Trade Commission (FTC) Chairman Andrew Ferguson sent a public warning letter to mortgage service provider Mortgage Connect L.P. (Mortgage Connect). The letter encourages Mortgage Connect to “conduct a comprehensive review of its employment contracts—including any noncompete agreements or other restrictive covenants—to ensure that they comply with applicable laws and are appropriately tailored to the circumstances.” To the extent that Mortgage Connect’s review of its employment contracts might identify any noncompete provisions or restrictive covenants that are “not reasonably necessary to achieve procompetitive aims,” the Chairman’s letter “strongly encourage[s]” Mortgage Connect to immediately discontinue its use of these agreements and to notify affected workers that these agreements will not be enforced.

The impetus for the Chairman’s letter was a routine civil lawsuit that Mortgage Connect filed in Pennsylvania state court, seeking to enforce a noncompete agreement against a former employee and the competitor that had hired her. According to the Chairman’s letter, the public docket from that lawsuit reveals that Mortgage Connect “requires all of its employees to sign noncompete agreements without regard to the employee’s role or responsibilities.” At trial, Mortgage Connect sought to defend this practice by arguing that its noncompete agreements are necessary to protect the investments Mortgage Connect makes in training its employees and to protect its confidential information and customer relationships. However, the Chairman’s letter explained that the docket in the case indicated that the employee at issue in the lawsuit had not received any specialized training while working for Mortgage Connect. And with respect to protecting Mortgage Connect’s confidential information and customer relationships, the docket indicated that Mortgage Connect can — and routinely does — protect those interests through alternative methods that are less restrictive than noncompetes; namely, through non-solicitation and non-disclosure agreements.

The Chairman’s letter to Mortgage Connect represents a new area of risk for companies that seek to enforce their noncompete agreements through litigation. The letter shows that FTC staffers may review materials from publicly available dockets to identify employers that may be using noncompete agreements in an allegedly indiscriminate or overbroad manner. As an antitrust enforcement agency, the FTC’s concern is not only that the overly aggressive use of noncompete agreements might harm the affected workers but also that such noncompete agreements can harm the competitive process by denying rivals and new entrants from access to the talent that they need to fully compete. The Chairman’s warning letter comes in the wake of the FTC’s efforts from 2023-2024, under the leadership of then-Chair Lina Khan, to adopt a regulation that would have banned the great majority of noncompete agreements nationwide. This rulemaking effort was ultimately defeated in court after two courts held that the regulation exceeded the FTC’s legitimate authority. Despite those losses, the new FTC Chairman has made very clear that the FTC will continue to investigate and challenge improper noncompete agreements on an individualized, case-by-case basis. To that end, in recent months, the FTC has brought enforcement actions against multiple companies alleging that their noncompete practices constitute “unfair methods of competition” and has sent warning letters to several large employers and staffing firms in the healthcare sector, urging those companies to review their noncompete agreements for compliance with applicable law. The Chairman’s letter to Mortgage Connect shows yet another tool at FTC’s disposal: reviewing publicly available dockets from ongoing lawsuits.