By Liz Swedock,
This article is responding to a survey response question we recently received. The reader asked, “Do you see a time when non-competes are not allowed in CT, similar to how CA approaches them? What would have to happen for that to occur? Do you believe it would be a net positive or negative?”
On March 4, 2021, Connecticut’s Labor and Public Employees Committee is holding a public hearing to discuss a new proposed bill which would vastly reduce the ability of employers to impose non-compete agreements on employees and independent contractors.
The bill, SB 906, “An Act Concerning Non-Compete Agreements,” would make it illegal for employers to impose non-compete agreements unless ALL of the following criteria are met:
- Maximum term of one year if unpaid, or maximum term of two years if the employee is paid their entire salary and benefits for the term of the non-compete; and
- If an exempt employee (paid a salary, not hourly wage earners), only if that individual is paid over 3x minimum wage (approximately $75,000+ per year for a full-time employee at the current minimum wage of $12 per hour);
- If an independent contractor, only if that individual is paid over 5x minimum wage (approximately $60 per hour or $125,000+); and
- The non-compete must be offered to the employee at least 10 business days BEFORE a deadline to accept the job offer (as either an employee or independent contractor) or the deadline to sign the non-compete (if already working in the job).
In addition, the proposed bill includes additional employee-favoring protections, including:
- If the individual being asked to sign the non-compete is already an employee or independent contractor, the individual must be paid “sufficient consideration” for agreeing to the non-compete. The current rule in Connecticut is less clear – some courts have held that, when it comes to at-will employment, simply being allowed to continue your job is “sufficient consideration” when your employer demands that you sign a non-compete after you have already been working for some time. If you refuse, they can fire you. This bill would create a clearer rule.
- The non-compete cannot require the employee litigate or arbitrate the non-compete outside of Connecticut. This is extremely helpful for employees who work for multistate (or worldwide) companies who often require that any disputes over the non-compete be brought wherever the company is headquartered. This could be across the country or across the world.
- Non-competes will be automatically invalid if they either (1) attempt to restrict the employee in any geographical location where they did not work during the prior two years, or (2) attempt to restrict anything other than “type of work” the employee actually did for the company. This is also very good for employees because many non-competes attempt to restrict employees from performing any work, even if non competitive, for any theoretically competing business, and try to apply non-competes to every location where the company does business – even if the employee only worked in one or a few locations.
We strongly support this type of legislation and will provide you with updates as the bill progresses.
Mark Carey Weighs In:
My first reaction to reading this proposed legislation was that it smacked of compromise between bipartisan politicians seeking to coddle employers and I am sure the CBIA was the biggest opponent here.
There is still no complete ban on noncompetition agreements here in Connecticut, as a majority of employees can still be benched on the sideline for a year without any pay for doing so. Employer lobby groups pushed their continued agenda to restrict the livelihood of employees, even during a pandemic. Noncompetition agreements are undemocratic in my opinion and should be abolished in Connecticut, just as they were in California and several other states. In a recent article, I argued that noncompetition agreements should be void due to impossibility during a pandemic. Now I see our democratically controlled General Assembly is screwing employees once again. Shame on you all, go explain that to the working class employees who voted you into office! When will this nonsense ever end?
According to the CBIA website, “[t]his bill could cause economic harm that comes from the loss of your trade secrets, proprietary information, client lists, source codes, or other confidential information.” This explanation is nonsense. Of the remaining businesses left in Connecticut, these employers already have in place confidentiality and proprietary protection agreements with their employees that protect against employee theft. There is also the common law claims of breach of the duty of loyalty and care that most employers use to go after bad actors in noncompete disputes. There are statutory claims such as Connecticut’s Unfair Trade Practices Act and the Uniform Trade Secrets Act employers use to prosecute bad actors. Noncompetition agreements are solely intended to harm employees from earning a livelihood, do not be fooled. Employers in the State of California are doing just fine since 1872, the year the state outlawed noncompetition agreements.