The FTC Doesn’t Need a Noncompete Ban to Target Your Agreements

Before your process server delivers your recently filed lawsuit against the former employee who just signed with a competitor, consider this: The Federal Trade Commission may already be reading your complaint.

That isn’t a hypothetical. On May 8, FTC Chairman Andrew Ferguson sent a warning letter to Mortgage Connect LP, a Pennsylvania mortgage lender, responding to material made public in a state court proceeding where the company was seeking to enforce a noncompete against a former employee and the competitor that hired her.

The agency received no tip, issued no subpoena, and conducted no independent investigation. It simply read a court filing. The evidentiary record assembled in that Pennsylvania courthouse—by Mortgage Connect itself—was all the FTC needed.

This is the most consequential message the FTC has sent to employers yet. Companies should understand that the act of noncompete enforcement can become the predicate for federal scrutiny.

A Constant Campaign

After a Texas district court vacated the FTC’s sweeping noncompete rule in 2024 and the commission formally withdrew its defense the following year, many employers concluded the regulatory threat had passed.

Ferguson quickly disabused them of that notion. Rather than pursue rulemaking, the agency pivoted to case-by-case enforcement under Section 5 of the FTC Act, which grants the agency authority to act against “unfair methods of competition.”

What followed was a deliberate, escalating campaign. In September 2025, Ferguson sent letters to several large healthcare employers and staffing firms, warning that noncompetes limit nurses and physicians’ employment options and patients’ choices—particularly in rural areas where medical services are already stretched thin. Deputy Director of the Bureau of Competition Kelse Moen confirmed the posture directly: “Enforcement against unreasonable noncompete agreements remains a top priority for the Federal Trade Commission.”

By April, the FTC had moved from warning letters to formal enforcement. It ordered Rollins Inc., one of the largest pest-control companies in the US, to stop enforcing noncompete agreements against more than 18,000 employees nationwide, while simultaneously sending warning letters to 13 other companies in the pest-control industry.

Rollins imposed blanket noncompetes that typically prohibited employees from working in the pest-control industry for two years after leaving—regardless of wage level, role, or access to any proprietary information. Then came the Mortgage Connect letter.

No industry has proven too small, too specialized, or too remote from Wall Street to escape the agency’s reach.

Lawsuits as Tips

The Mortgage Connect situation exposes something more consequential than its specific facts: It reveals how the FTC finds its targets.

The FTC identified three problems from the litigation record alone. First, Mortgage Connect appeared to require all employees to sign noncompete agreements without individualized assessment.

Second, any legitimate interest in protecting confidential information could have been addressed through a narrower instrument—a nondisclosure agreement.

Third, the company’s training justification didn’t hold up. The former employee at issue didn’t appear to have received specialized training from Mortgage Connect, undermining one of the most frequently invoked rationales for these restrictions.

Every employer that litigates a noncompete now litigates in front of two audiences. The first is the judge. The second is the FTC. The agency monitors prominent employment litigation through legal news outlets; tracks complaints through its public portal; and has drawn from a public inquiry it launched in September that solicited input from workers, advocacy groups, and industry participants.

Filing suit to enforce a noncompete is now functionally equivalent to opening your employment practices to federal review of your noncompete program across your entire workforce. This is a materially different calculus than the one most employers were running a year ago.

Takeaways for Employers

Warning letters cost the FTC almost nothing to issue, but the consequences are more serious for recipients.

A company that receives a letter and continues the challenged conduct does so with constructive knowledge that the agency has placed it on record—a fact that would weigh heavily in any subsequent enforcement proceeding. Each letter also builds precedent establishing that certain practices constitute unfair methods of competition under Section 5, independent of any formal rule. That body of precedent may prove more durable than the rule courts struck down.

The FTC’s targets share a profile. Blanket noncompete requirements applied uniformly across job roles—binding employees without meaningful access to confidential information or specialized training—are the clearest and most consistent exposure.

That includes pest-control technicians and customer-service representatives earning relatively low wages and employees who had no ability to negotiate, received no additional consideration for signing, and were asked to sign with little opportunity to understand what they were agreeing to.

Narrower instruments such as nondisclosure agreements and non-solicitation clauses can protect most legitimate business interests without the same regulatory risk.

Before suing to enforce a noncompete, employers must assess whether doing so would expose broader workforce practices to federal review. Mortgage Connect learned that answer in hindsight.

The nationwide noncompete ban is gone, but not the FTC’s attention.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Stephen E. Fox is a partner at Sheppard with more than 25 years of experience as a trusted adviser and litigation advocate for clients in complicated and often high-profile business and employment disputes.

Kyle P. Klein is an associate at Sheppard who defends employers against complaints for class action and single-plaintiff matters.

Interested in writing? Review our author guidelines, and submit pitches to Insights@bloombergindustry.com.