Christopher A. Pickett

What happens when a routine effort to enforce a non-compete agreement attracts the attention of federal regulators? On May 8, 2026, FTC Chairman Andrew N. Ferguson issued a warning letter to Mortgage Connect, a national mortgage services provider, expressing concerns that the company’s use of employee non-compete agreements “may unfairly and unreasonably restrain competition” in violation of federal antitrust laws, including Section 5 of the FTC Act. While the letter is not a formal enforcement action, it provides insight into how the FTC is still evaluating non-competes and highlights the legal risks employers face when they rely on broad restrictive covenants.

What Prompted the FTC’s Concern?

The letter stems from Mortgage Connect L.P. v. Harvey, in which Mortgage Connect sued a former employee and the employee’s new employer in Pennsylvania state court to enforce a non-compete. After reviewing evidence introduced by Mortgage Connect, the FTC concluded that Mortgage Connect requires “all of its employees to sign non-compete agreements without regard to the employee’s role or responsibilities.” The FTC also asserted that Mortgage Connect’s non-competes were unfairly burdening workers and may deprive smaller competitors and market entrants of access to new workers with relevant experience, prohibiting them from competing against Mortgage Connect. Conversely, the FTC discussed that Mortgage Connect did provide some legitimate reasons for using and enforcing its non-competes, including, but not limited to, the protection of confidential, proprietary, and trade secret information; goodwill, reputation, and standing in the industry; and employees’ specialized skills. The FTC emphasized, however, that while those reasons were legitimate, they could be protected by less restrictive means. In fact, the FTC recognized that Mortgage Connect already used narrower restraints, including non-solicitation and non-disclosure agreements, that could address those concerns without using broadly applied non-competes. Notably, the letter further observed that court filings suggested the employee at issue received little more than basic orientation and may not have received specialized training that would justify a broad post-employment restriction.

A Roadmap for FTC Enforcement

Although framed as a warning letter, the document provides a clear roadmap for industry-agnostic factors the FTC may consider when evaluating non-compete agreements going forward.

• Whether the non-compete is imposed broadly across the workforce rather than limited to employees with access to sensitive information.
• Whether the restriction is reasonably necessary to achieve a legitimate business objective.
• Whether less restrictive alternatives could adequately protect the employer’s interests.
• Whether the employee actually receives specialized training or exposure to protectable information.
• Whether the agreement may impede labor market competition by preventing workers from moving to competitors.

The FTC again is emphasizing that employers must be prepared to justify the necessity and scope of their restrictions. The letter also references prior FTC statements that “unreflective, unjustified, and anticompetitive non-compete agreements” remain a priority enforcement area.

The Legal Implications for Employers

The letter to Mortgage Connect further demonstrates that FTC scrutiny of non-compete agreements will continue. As the FTC has stated on multiple prior occasions, it is not relying solely on rulemaking. Instead, it is willing to use its enforcement authority under Section 5 of the FTC Act to challenge individual agreements or company practices that it believes unfairly restrict competition. The letter makes clear that employers still face several risks:

• Regulatory Risk: Even where a non-compete may be enforceable under state law, the FTC may independently examine whether the agreement may have anticompetitive effects under federal law. Consequently, analyzing the enforceability only under the state law in which you may want to enforce the agreement is no longer sufficient to properly analyze risk.
• Litigation Risk: The Mortgage Connect letter makes clear that initiating private litigation against a former employee can attract regulatory attention. Because pleadings are public, they can be analyzed by regulators, leading to warning letters, investigations, or regulatory enforcement actions. Consequently, before initiating litigation, employers should assess whether the broader use of non-competes is necessary and carefully weigh the regulatory, litigation, and business risks associated with enforcement.
• Reputational Risk: FTC warning letters can create significant reputational concerns, particularly where the agency publicly characterizes a company’s practices as potentially harmful to workers or competition.
• Workforce Mobility Challenges: Employers relying on blanket non-competes may face increasing scrutiny, especially if restrictions are applied to employees who lack access to trade secrets, strategic information, or unique client relationships. The FTC is again making clear that a one-size-fits-all approach will be difficult to justify.

Practical Takeaways

The Mortgage Connect warning letter serves as another reminder that employers should review their restrictive covenant programs and assess whether their restrictions remain necessary and appropriately tailored for specific employee categories.

Employers should:

• Limit non-competes to employees with legitimate access to sensitive competitive information.
• Evaluate whether non-disclosure, confidentiality, or non-solicitation provisions would adequately protect business interests.
• Document the specific business justification supporting any non-compete in use by the employer.
• Avoid blanket policies or programs that require all employees to sign identical non-competes.
• Continue to review non-competes to ensure compliance with rapidly evolving state and federal developments.

Bottom Line

The FTC’s letter to Mortgage Connect sends a clear message: non-competes remain a significant enforcement priority. While the agency did not allege a legal violation, Chairman Ferguson strongly encouraged Mortgage Connect to discontinue any restrictions that are not “reasonably necessary” and to notify affected workers accordingly. For employers, the lesson is straightforward: non-competes cannot be viewed as routine employment documents. Instead, they should be carefully tailored, supported by legitimate business interests, and regularly reviewed to withstand increasing scrutiny from regulators, courts, and employees alike.

If you have questions about non-compete agreements, please contact your UBG attorney or Chris Pickett at cpickett@ubglaw.com.

The information provided in this alert reflects the information and guidance we have available as of the date of publication and is subject to change. This legal update was prepared by UB Greensfelder LLP and is not intended as a substitute for professional legal advice, nor does it create an attorney-client relationship.