The Federal Trade Commission recently indicated in a warning letter to a mortgage services company that it is ramping up its scrutiny of employers that require noncompete agreements from all employees and impose restrictions that limit workers’ mobility and competition. The FTC indicated that it is using its Section 5 authority to assess whether such provisions violate federal antitrust law by being “unjustified, overbroad, or otherwise unfair or anticompetitive.”
The agency emphasized that employers can use less restrictive alternatives, such as non-disclosure or non-solicitation agreements, to protect their companies’ confidential information, goodwill, or specialized skills.
The FTC’s warning letter confirms that the agency is advancing its noncompete agenda through case-by-case enforcement after the failure of its 2024 rulemaking. Notably, the employer’s lawsuit to enforce a noncompete triggered the FTC’s involvement, indicating that enforcement may draw federal scrutiny and turn routine contract enforcement decisions into potential antitrust risk for an employer.
Members of the Center for Workplace Compliance (CWC), our affiliated nonprofit membership association, can read more here.