CT
Connecticut House Bill HB06913

Connecticut 2019 Regular Session

Connecticut House Bill HB06913 Compare Versions

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7-General Assembly Substitute Bill No. 6913
4+LCO No. 6222 1 of 4
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6+General Assembly Committee Bill No. 6913
87 January Session, 2019
8+LCO No. 6222
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11+Referred to Committee on LABOR AND PUBLIC EMPLOYEES
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13+
14+Introduced by:
15+(LAB)
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1419 AN ACT CONCERNING COVENANTS NOT TO COM PETE.
1520 Be it enacted by the Senate and House of Representatives in General
1621 Assembly convened:
1722
1823 Section 1. (NEW) (Effective from passage) (a) For purposes of this 1
1924 section: 2
2025 (1) "Base salary and benefits" means (A) wages, as defined in section 3
2126 31-71a of the general statutes, earned over the course of the prior 4
2227 calendar year, without consideration of any overtime or bonus 5
23-compensation, and (B) health insurance benefits and other fringe 6
24-benefits received by an employee over the course of the prior calendar 7
25-year; 8
28+compensation, (B) fringe benefits received over the course of the prior 6
29+calendar year, and (C) health benefits received by an employee over 7
30+the course of the prior calendar year; 8
2631 (2) "Employee" includes any person suffered or permitted to work 9
2732 by an employer; 10
28-(3) "Employer" has the same meaning as provided in section 31-71a 11
29-of the general statutes; 12
30-(4) "Covenant not to compete" means a contract, provision or 13
31-agreement that restrains an employee from engaging in any lawful 14
32-profession, occupation, trade, calling or business of any kind in any 15
33-geographic area of the state for any period of time after the termination 16
34-of employment; 17 Substitute Bill No. 6913
33+(3) "Employer" includes any individual, partnership, association, 11
34+joint stock company, trust, corporation, the administrator or executor 12
35+of the estate of a deceased person, the conservator of the estate of an 13
36+incompetent, or the receiver, trustee, successor or assignee of any of 14
37+the same, employing any person, including the state and any political 15
38+Committee Bill No. 6913
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41-(5) "Separation agreement" means an agreement accompanying the 18
42-termination or separation of employment without cause in which the 19
43-employee releases claims or potential claims against the employer. 20
44-(b) Except as provided in section 31-50a or 31-50b of the general 21
45-statutes, an employer may obtain from an employee a covenant not to 22
46-compete only if it (1) does not restrict the employee's competitive 23
47-activities for a period of more than one year following the termination 24
48-or separation of the employee; (2) is necessary to protect a legitimate 25
49-business interest of the employer; (3) is reasonably limited in time, 26
50-geographic scope and employment restrictions as necessary to protect 27
51-such business interest; (4) is consistent with this section, other law of 28
52-this state and public policy; and (5) is entered into by an employee 29
53-who receives compensation at an hourly rate of more than twice the 30
54-minimum fair wage as defined in section 31-58 of the general statutes. 31
55-The party seeking to enforce a covenant not to compete shall have the 32
56-burden of proof in any proceeding. 33
57-(c) A covenant not to compete that is entered into, amended, 34
58-extended or renewed on or after July 1, 2019, shall not be enforceable 35
59-against any employee if (1) such covenant was not made in 36
60-anticipation of a sale of the goodwill of a business or all of the seller's 37
61-ownership interest in a business, or as part of a partnership or 38
62-ownership agreement and such contract or agreement expires and is 39
63-not renewed, unless, prior to such expiration, the employer makes a 40
64-bona fide offer to renew the contract on the same or similar terms and 41
65-conditions; (2) the employment or contractual relationship is 42
66-terminated by the employer; or (3) the employment or contractual 43
67-relationship is terminated by the employee for good cause attributable 44
68-to the employer. 45
69-(d) A covenant not to compete that meets the requirements of 46
70-subsections (b), (c) and (e) of this section shall not be invalid under this 47
71-section based upon its duration of more than one year, but not longer 48
72-than two years, following the termination of employment if it is a part 49
73-of an employment agreement or a separation agreement under which 50 Substitute Bill No. 6913
43+subdivision thereof; 16
44+(4) "Covenant not to compete" means a contract, provision or 17
45+agreement that restrains an employee from engaging in any lawful 18
46+profession, occupation, trade, calling or business of any kind in any 19
47+geographic area of the state for any period of time after the termination 20
48+of employment; 21
49+(5) "Separation agreement" means an agreement accompanying the 22
50+termination or separation of employment without cause in which the 23
51+employee releases claims or potential claims against the employer. 24
52+(b) Except as provided in section 31-50a or 31-50b of the general 25
53+statutes, an employer may obtain from an employee a covenant not to 26
54+compete only if it is (1) not restrictive of the employee's competitive 27
55+activities for a period of more than one year following the termination 28
56+of the employee; (2) necessary to protect a legitimate business interest 29
57+of the employer; (3) reasonably limited in time, geographic scope and 30
58+employment restrictions as necessary to protect such business interest; 31
59+(4) in conformance with subsections (c) and (e) of this section; (5) 32
60+entered into by an employee who receives compensation at an hourly 33
61+rate of more than twice the minimum fair wage as defined in section 34
62+31-58 of the general statutes; and (6) otherwise consistent with the law 35
63+of this state and public policy. The party seeking to enforce a covenant 36
64+not to compete shall have the burden of proof in any proceeding. 37
65+(c) A covenant not to compete that is entered into, amended, 38
66+extended or renewed on or after July 1, 2019, shall not be enforceable 39
67+against any employee if (1) such employment contract or agreement 40
68+was not made in anticipation of a sale of the goodwill of a business or 41
69+all of the seller's ownership interest in a business, or as part of a 42
70+partnership or ownership agreement and such contract or agreement 43
71+expires and is not renewed, unless, prior to such expiration, the 44
72+employer makes a bona fide offer to renew the contract on the same or 45
73+similar terms and conditions; (2) the employment or contractual 46
74+relationship is terminated by the employee by the employer; or (3) the 47
75+Committee Bill No. 6913
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80-the employer agrees to continue to compensate the employee with the 51
81-employee's base salary and benefits for a period of not less than one 52
82-year following the termination of employment. 53
83-(e) Each covenant not to compete that is entered into, amended, 54
84-extended or renewed on or after July 1, 2019, shall (1) be provided to 55
85-the employee not less than ten business days prior to the date of 56
86-signing; (2) expressly state that the employee has the right to consult 57
87-with counsel prior to signing; and (3) be signed by the employee and 58
88-the employer. 59
89-(f) The remaining provisions of any contract or agreement that 60
90-includes a covenant not to compete that is rendered void and 61
91-unenforceable, in whole or in part, under the provisions of this section 62
92-shall remain in full force and effect, including provisions that require 63
93-the payment of damages resulting from any injury suffered by reason 64
94-of termination or separation of employment. 65
95-(g) The provisions of this section shall apply to agreements or 66
96-covenants entered into, renewed or extended on or after June 30, 2019. 67
80+employment or contractual relationship is terminated by the employee 48
81+for good cause attributable to the employer. 49
82+(d) A covenant not to compete conforming in all respects to the 50
83+requirements of subsections (b), (c) and (e) of this section shall not be 51
84+invalid under the provisions of this section based upon its duration of 52
85+more than one year but not longer than two years following the 53
86+termination of employment if it is a part of an employment agreement 54
87+or a separation agreement under which the employer agrees to 55
88+continue to compensate the employee with the employee's base salary 56
89+and benefits for a period of not less than one year following the 57
90+termination of employment. 58
91+(e) Each covenant not to compete entered into, amended or renewed 59
92+on or after July 1, 2019, shall (1) be provided to the employee not less 60
93+than ten business days prior to the date of signing; (2) expressly state 61
94+that the employee has the right to consult with counsel prior to 62
95+signing; and (3) be signed by the employee and the employer. 63
96+(f) The remaining provisions of any contract or agreement that 64
97+includes a covenant not to compete that is rendered void and 65
98+unenforceable, in whole or in part, under the provisions of this section 66
99+shall remain in full force and effect, including provisions that require 67
100+the payment of damages resulting from any injury suffered by reason 68
101+of termination of such contract or agreement. 69
102+(g) The provisions of this section shall apply to agreements or 70
103+covenants entered into, renewed or extended on or after June 30, 2019. 71
97104 This act shall take effect as follows and shall amend the following
98105 sections:
99106
100107 Section 1 from passage New section
101108
102-Statement of Legislative Commissioners:
103-Subsecs. (a)(1) and (b) to (f), inclusive, were rewritten for clarity and
104-consistency, and Subsec. (a)(3) was rewritten to be consistent with
105-existing statutory language.
109+Committee Bill No. 6913
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107-LAB Joint Favorable Subst. -LCO
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112+LCO No. 6222 4 of 4
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114+Statement of Purpose:
115+To prohibit employers from requiring certain employees from signing
116+unfair covenants not to compete.
117+[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline,
118+except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is
119+not underlined.]
120+
121+Co-Sponsors: REP. VARGAS, 6th Dist.
122+
123+H.B. 6913
124+
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