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General Assembly Substitute Bill No. 6913
January Session, 2019
AN ACT CONCERNING CO VENANTS NOT TO COMPE TE.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. (NEW) (Effective from passage) (a) For purposes of this 1
section: 2
(1) "Base salary and benefits" means (A) wages, as defined in section 3
31-71a of the general statutes, earned over the course of the prior 4
calendar year, without consideration of any overtime or bonus 5
compensation, and (B) health insurance benefits and other fringe 6
benefits received by an employee over the course of the prior calendar 7
year; 8
(2) "Employee" includes any person suffered or permitted to work 9
by an employer; 10
(3) "Employer" has the same meaning as provided in section 31-71a 11
of the general statutes; 12
(4) "Covenant not to compete" means a contract, provision or 13
agreement that restrains an employee from engaging in any lawful 14
profession, occupation, trade, calling or business of any kind in any 15
geographic area of the state for any period of time after the termination 16
of employment; 17 Substitute Bill No. 6913
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(5) "Separation agreement" means an agreement accompanying the 18
termination or separation of employment without cause in which the 19
employee releases claims or potential claims against the employer. 20
(b) Except as provided in section 31-50a or 31-50b of the general 21
statutes, an employer may obtain from an employee a covenant not to 22
compete only if it (1) does not restrict the employee's competitive 23
activities for a period of more than one year following the termination 24
or separation of the employee; (2) is necessary to protect a legitimate 25
business interest of the employer; (3) is reasonably limited in time, 26
geographic scope and employment restrictions as necessary to protect 27
such business interest; (4) is consistent with this section, other law of 28
this state and public policy; and (5) is entered into by an employee 29
who receives compensation at an hourly rate of more than twice the 30
minimum fair wage as defined in section 31-58 of the general statutes. 31
The party seeking to enforce a covenant not to compete shall have the 32
burden of proof in any proceeding. 33
(c) A covenant not to compete that is entered into, amended, 34
extended or renewed on or after July 1, 2019, shall not be enforceable 35
against any employee if (1) such covenant was not made in 36
anticipation of a sale of the goodwill of a business or all of the seller's 37
ownership interest in a business, or as part of a partnership or 38
ownership agreement and such contract or agreement expires and is 39
not renewed, unless, prior to such expiration, the employer makes a 40
bona fide offer to renew the contract on the same or similar terms and 41
conditions; (2) the employment or contractual relationship is 42
terminated by the employer; or (3) the employment or contractual 43
relationship is terminated by the employee for good cause attributable 44
to the employer. 45
(d) A covenant not to compete that meets the requirements of 46
subsections (b), (c) and (e) of this section shall not be invalid under this 47
section based upon its duration of more than one year, but not longer 48
than two years, following the termination of employment if it is a part 49
of an employment agreement or a separation agreement under which 50 Substitute Bill No. 6913
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the employer agrees to continue to compensate the employee with the 51
employee's base salary and benefits for a period of not less than one 52
year following the termination of employment. 53
(e) Each covenant not to compete that is entered into, amended, 54
extended or renewed on or after July 1, 2019, shall (1) be provided to 55
the employee not less than ten business days prior to the date of 56
signing; (2) expressly state that the employee has the right to consult 57
with counsel prior to signing; and (3) be signed by the employee and 58
the employer. 59
(f) The remaining provisions of any contract or agreement that 60
includes a covenant not to compete that is rendered void and 61
unenforceable, in whole or in part, under the provisions of this section 62
shall remain in full force and effect, including provisions that require 63
the payment of damages resulting from any injury suffered by reason 64
of termination or separation of employment. 65
(g) The provisions of this section shall apply to agreements or 66
covenants entered into, renewed or extended on or after June 30, 2019. 67
This act shall take effect as follows and shall amend the following
sections:
Section 1 from passage New section
Statement of Legislative Commissioners:
Subsecs. (a)(1) and (b) to (f), inclusive, were rewritten for clarity and
consistency, and Subsec. (a)(3) was rewritten to be consistent with
existing statutory language.
LAB Joint Favorable Subst. -LCO