FTC Warns Mortgage Servicer on Blanket Use of Noncompete Agreements

The FTC warned a mortgage services company that its blanket use of noncompete agreements may violate federal antitrust law.

In a letter to the company's counsel, the agency said it has been using its authority under Section 5 of the FTC Act, 15 U.S.C. § 45, ("Unfair methods of competition unlawful,") to investigate whether particular noncompete agreements are unjustified, overbroad, or otherwise unfair or anticompetitive.

The agency said that the company's practice of requiring all employees to sign noncompete agreements - regardless of role or responsibilities - may deprive smaller competitors and new entrants of potential experienced workers. The FTC noted that the company already used narrower tools, including non-solicitation and non-disclosure agreements, that could adequately protect its legitimate business interests without broad noncompete agreements. The agency said that court filings from a pending Pennsylvania lawsuit indicated that the employee at the center of the lawsuit received no specialized training from the company, thereby undermining one of the company's stated justifications for requiring broad non-compete agreements.

The FTC urged the company to review all employment contracts, immediately discontinue noncompetes that are not reasonably necessary to achieve pro-competitive aims, and notify affected workers in plain, accessible language.