Mortgage loan originators by nature are forward-thinking professionals always looking for new opportunities to improve their business. With a minor exception, MLOs are only allowed to be sponsored by one company at a time, which limits the extent of their independence. As a result, many MLOs have signed employment agreements that include non-competition or other clauses written to protect their sponsors.
A new Federal Trade Commission (FTC) rule would ban employers from using non-competition agreements. According to a press release announcing the new rule, the FTC considers these agreements to be “a widespread and often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses. By stopping this practice, the agency estimates that the new proposed rule could increase wages by nearly $300 billion per year and expand career opportunities for about 30 million Americans.”
Non-competition or non-compete agreements allow an employer to restrict or greatly reduce an employee from taking another job in direct competition with the former employer. To be enforceable, they must have a clear geographic location and time period. Generally, the shorter the time period or the smaller the geographic location, the more enforceable the agreement.