New Ruling and Letter on Noncompete Clauses

My very first writing assignment in law school involved covenants not to compete. One of the most fascinating aspects of these agreements is that they can be treated very differently depending on the industry. There is also a long history of the courts either declining to enforce a covenant altogether or modifying it to make it enforceable.  As a result, new decisions in this area are always worth watching. And there’s a recent Pennsylvania court decision in a real estate-adjacent field, along with some input about noncompetes from the Federal Trade Commission. 

What is a covenant not to compete? 

It is a contract in which one party agrees not to enter into or start a similar profession or business that competes with another party. These agreements are often referred to as noncompete clauses and are commonly found in employment contracts. Historically, courts have considered the wording of the noncompete, the length of time it remains in effect after employment ends, the geographic area it covers and the industry involved. 

The goal is typically to balance a company’s legitimate interest in protecting its business and trade secrets against an employee’s ability to earn a living in their chosen profession. Courts also generally respect negotiated agreements and seek to enforce valid contracts. However, when a noncompete is overly restrictive, courts have sometimes refused to enforce it entirely. 

A Recent Court Ruling 

A recent case, Mortgage Connect, L.P. v. Melissa Harvey & First Title & Escrow, Inc., filed in the Allegheny County Court of Common Pleas, involved a noncompete agreement signed by Melissa Harvey, a senior vice president at Mortgage Connect. After leaving the company to join First Title & Escrow in May 2025, Mortgage Connect sought to enforce an agreement she had signed in August 2022. The agreement restricted Harvey from competing for one year and imposed a nationwide geographic limitation. 

The court found that the one-year restriction was reasonable but determined that the nationwide geographic scope was overly broad and therefore unenforceable. In reaching its decision, the court noted that the covenant would effectively prevent Harvey from working in nearly any capacity within the mortgage industry, where she had spent most of her career. The court also considered that Harvey had not taken confidential information from Mortgage Connect and did not serve in a client-facing role. Together, those factors weighed against enforcing the restriction as written.  

While the court focused on whether the specific restrictions were enforceable under state law, the Federal Trade Commission’s concerns highlight a broader policy debate over the use of noncompete agreements. Traditionally, noncompete clauses have been governed by state law, rather than federal law. 

However, the FTC has been examining whether certain noncompete agreements are unjustified, overly broad, unfair or anticompetitive. The letter notes that, based on information reviewed by the agency, Mortgage Connect appears to require all employees to sign the same noncompete agreement regardless of position. 

According to the FTC, the agreement does not appear to be tailored to an employee’s specific roles and responsibilities or demonstrate why such restrictions are necessary to protect the company’s interests. This may negatively affect competition by limiting other companies’ ability to hire experienced professionals who have previously worked for Mortgage Connect. The letter does not constitute formal enforcement action; it expresses concern and encourages the company to review its agreements to ensure they are not overly broad or anticompetitive. 

What does this mean for real estate? 

Many brokerages either have included or have considered including noncompete clauses in their agreements with agents and managers. This recent court decision and FTC letter serve as reminders that noncompete agreements are generally viewed with caution and will be scrutinized if they are overly broad or restrictive. Any such restriction should be narrowly tailored in scope and should not effectively prevent an individual from working in their profession. The hotline cannot provide language for drafting noncompete agreements, so brokerages interested in implementing one should consult experienced legal counsel.