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General Assembly Raised Bill No. 906
January Session, 2021
LCO No. 3466
Referred to Committee on LABOR AND PUBLIC EMPLOYEES
Introduced by:
(LAB)
AN ACT CONCERNING NO N-COMPETE AGREEMENTS .
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. (NEW) (Effective July 1, 2021) For purposes of sections 1 to 1
4, inclusive, of this act: 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) "Covenant not to compete" means a contract, provision or 9
agreement entered into, amended, extended or renewed on or after July 10
1, 2021, that restrains a worker from, or imposes penalties on a worker 11
for, engaging in any lawful profession, occupation, trade, calling or 12
business of any kind in any geographic area of the state for any period 13
of time after separation from employment, but does not mean (A) a 14
nonsolicitation agreement, (B) a nondisclosure or confidentiality 15 Raised Bill No. 906
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agreement, or (C) a contract, provision or agreement in which an 16
employee agrees not to reapply for employment with an employer after 17
being terminated by such employer; 18
(3) "Covenant not to compete predicated on ownership interest" 19
means a covenant not to compete made (A) in anticipation of a sale of 20
the goodwill of a business or all of the seller's ownership interest in a 21
business, or (B) as part of a partnership or ownership agreement and 22
such contract or agreement expires and is not renewed, unless, prior to 23
such expiration, the employer makes a bona fide offer to renew the 24
contract on the same or similar terms and conditions; 25
(4) "Employee" means any individual employed or permitted to work 26
by an employer; 27
(5) "Employer" has the same meaning as provided in section 31-71a 28
of the general statutes; 29
(6) "Exclusivity agreement" means a contract, provision or agreement 30
entered into, amended, extended or renewed on or after July 1, 2021, 31
that restrains a worker from, or imposes penalties on a worker for, 32
having an additional job, supplementing their income by working for 33
another employer, working as an independent contractor or being self-34
employed; 35
(7) "Exempt employee" means an employee not included in the 36
definition of "employee" in section 31-58 of the general statutes; 37
(8) "Franchisee" has the same meaning as provided in section 42-133e 38
of the general statutes; 39
(9) "Franchisor" has the same meaning as provided in section 42-133e 40
of the general statutes; 41
(10) "Legitimate business interest" means an interest in the protection 42
of trade secrets, or confidential information that does not qualify as a 43
trade secret, or an interest in preventing solicitation of the employer's 44
customers; 45 Raised Bill No. 906
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(11) "Monetary compensation" means (A) wages, as defined in section 46
31-71a of the general statutes, earned over the course of the prior year, 47
or portion thereof for which the employee was employed, annualized 48
based on the period of employment and calculated as of the earlier of 49
the date enforcement of the covenant not to compete is sought or the 50
date of separation from employment, and (B) payments made to 51
independent contractors based on services rendered, annualized based 52
on the period during which the independent contractor provided 53
services and calculated as of the earlier of the date enforcement of the 54
covenant not to compete is sought or the date of separation from 55
employment; 56
(12) "Nonsolicitation agreement" means (A) a contract, provision or 57
agreement between an employer and employee that prohibits 58
solicitation by an employee, upon termination of employment of (i) any 59
employee of the employer to leave the employer, or (ii) of any customer 60
of the employer, to cease or reduce the extent to which it is doing 61
business with the employer, or (B) a contract, provision or agreement 62
between an employer and any customer thereof that prohibits 63
solicitation by the customer of an employee of the employer to cease or 64
reduce the extent to which it is doing business with the employer; 65
(13) "Separation agreement" means an agreement accompanying the 66
termination or separation of employment without cause in which the 67
employee releases claims or potential claims against the employer; 68
(14) "Separation from employment" means any event at which an 69
employment or independent contractor relationship ends; and 70
(15) "Worker" means an employee or an independent contractor. 71
Sec. 2. (NEW) (Effective July 1, 2021) (a) No employer or contractor 72
may request or require a worker to sign or agree to a covenant not to 73
compete, and any such covenant not to compete shall not be enforceable 74
against such worker, unless all of the following conditions are met: (1) 75
Such covenant does not restrict the worker's competitive activities for a 76
period of more than one year following the termination or separation of 77 Raised Bill No. 906
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the employee; (2) such covenant is necessary to protect a legitimate 78
business interest of the employer, and such business interest could not 79
reasonably be protected via less restrictive means, including, but not 80
limited to, a nondisclosure agreement, nonsolicitation agreement, or 81
reliance on the protections provided by the provisions of chapter 625 of 82
the general statutes; (3) such covenant is no more restrictive than 83
necessary to protect such business interest in terms of the covenant's 84
duration, geographic scope, type of work and type of employer; (4) such 85
worker is an exempt employee earning monetary compensation of more 86
than three times the minimum fair wage as defined in section 31-58 of 87
the general statutes, or such worker is an independent contractor 88
earning monetary compensation of more than five times said minimum 89
fair wage; and (5) the written text of such covenant is provided to the 90
worker no later than ten business days prior to the earlier of (A) the 91
deadline for acceptance of the offer of employment or the offer to enter 92
into an independent contractor relationship, or (B) the date of signing of 93
such covenant; (6) such covenant expressly states that the worker has 94
the right to consult with counsel prior to signing; (7) such covenant is 95
signed by the worker and the employer or contractor separately from 96
any other agreement underlying the relationship; (8) if such covenant is 97
added to an existing employment or independent contractor 98
relationship, it is supported by sufficient consideration independent 99
from continuation of the employment or contractor relationship; (9) 100
such covenant does not require the worker to submit to adjudication in 101
a forum outside of Connecticut, or otherwise purport to deprive the 102
worker of the protections or benefits of this section; and (10) such 103
covenant does not unreasonably interfere with the public's interests and 104
is consistent with this section, other laws of this state and public policy. 105
(b) Even if otherwise valid under this section, a covenant not to 106
compete that applies to geographic areas in which an employee neither 107
provided services nor had a material presence or influence within the 108
last two years of employment, or that applies to types of work that the 109
employee did not perform during the last two years of employment, 110
shall be presumed entirely unenforceable. 111 Raised Bill No. 906
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(c) Notwithstanding the provisions of subdivision (1) of subsection 112
(a) of this section, a covenant not to compete shall be permitted and 113
enforceable for a period no longer than two years following separation 114
from employment if such covenant is a part of an agreement under 115
which the worker is compensated with the worker's base salary and 116
benefits, minus any outside compensation, for the entire period of such 117
covenant. 118
(d) Notwithstanding the provisions of subsection (a) of this section, a 119
covenant not to compete predicated on ownership interest shall be 120
permitted and enforceable unless (1) the employment or contractual 121
relationship is terminated by the employer or contractor; or (2) the 122
employment or contractual relationship is terminated by the worker for 123
good cause attributable to the employer or contractor. 124
(e) This section shall not apply to any covenant not to compete as 125
defined in section 20-14p, 20-681, or 31-50b of the general statutes. 126
Sec. 3. (NEW) (Effective July 1, 2021) (a) No employer or contractor 127
may request or require a worker to sign or agree to an exclusivity 128
agreement unless the worker is an exempt employee earning monetary 129
compensation of more than three times the minimum fair wage as 130
defined in section 31-58 of the general statutes, or the worker is an 131
independent contractor earning monetary compensation of more than 132
five times said minimum fair wage. 133
(b) This section shall not apply when the worker's having an 134
additional job, supplementing their income by working for another 135
employer, working as an independent contractor, or being self-136
employed would: (1) Imperil the safety of the worker, the worker's 137
coworkers or the public; or (2) substantially interfere with the 138
reasonable and normal scheduling expectations of the employer or 139
contractor. 140
(c) This section shall not be construed to alter any obligations of an 141
employee to an employer under existing law, including, but not limited 142
to, the common law duty of loyalty and laws preventing conflicts of 143 Raised Bill No. 906
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interest and any corresponding policies addressing such obligations. 144
Sec. 4. (NEW) (Effective July 1, 2021) (a) The party seeking to enforce 145
a covenant not to compete or an exclusivity agreement against a worker 146
shall have the burden of proof in any enforcement proceeding. The 147
party required to continue to compensate an employee or independent 148
contractor in an agreement under subsection (c) of section 2 of this act 149
shall have the burden of proof in any proceeding to enforce such 150
requirement to continue to compensate such employee or independent 151
contractor. 152
(b) The provisions of any contract or agreement constituting a 153
covenant not to compete or exclusivity agreement may be held partially 154
enforceable only to the extent that such provisions constitute a 155
combination of several distinct covenants. A covenant intended by the 156
parties to be an entirety may only be held fully enforceable or 157
unenforceable. 158
(c) Any severable provisions of any contract or agreement that 159
includes a covenant not to compete or an exclusivity agreement that is 160
held unenforceable under the provisions of sections 1 to 3, inclusive, of 161
this act shall remain in full force and effect, including, but not limited 162
to, any provisions that require the payment of damages resulting from 163
any injury suffered by reason of termination or separation of 164
employment. 165
(d) The Attorney General, on behalf of a worker or workers, or any 166
worker aggrieved by a violation of this section may bring a civil action 167
in the Superior Court for any and all relief provided in this section. In 168
such actions, the plaintiff shall carry the burden of proof by a 169
preponderance of the evidence. 170
(e) If a court or arbitrator determines that a covenant not to compete 171
or an exclusivity agreement violates this section, the violator is liable for 172
the greater of the aggrieved worker's actual damages or a statutory 173
penalty of five thousand dollars, in addition to reasonable attorney's 174
fees, expenses and court costs. 175 Raised Bill No. 906
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(f) Notwithstanding section 31-69a of the general statutes, no 176
employer, officer, agent or other person who violates any provision of 177
this section shall be liable to the Labor Department for a civil penalty. 178
Sec. 5. Section 31-50a of the general statutes is repealed and the 179
following is substituted in lieu thereof (Effective July 1, 2021): 180
(a) No employer may require any person employed in the 181
classification 339032 of the standard occupational classification system 182
of the Bureau of Labor Statistics of the United States Department of 183
Labor to enter into an agreement prohibiting such person from engaging 184
in the same or a similar job, at the same location at which the employer 185
employs such person, for another employer or as a self-employed 186
person, unless the employer proves that such person has obtained trade 187
secrets, as defined in subsection (d) of section 35-51, of the employer. 188
(b) (1) Any person who is aggrieved by a violation of this section may 189
bring a civil action in the Superior Court to recover damages and for 190
such injunctive and equitable relief as the court deems appropriate. 191
(2) The Labor Commissioner may request the Attorney General to 192
bring an action in the superior court for the judicial district of Hartford 193
for restitution on behalf of any person injured by any violation of this 194
section and for such injunctive or equitable relief as the court deems 195
appropriate. 196
(c) The provisions of this section shall apply to agreements entered 197
into, renewed or extended on or after October 1, 2007, and before July 1, 198
2021. 199
This act shall take effect as follows and shall amend the following
sections:
Section 1 July 1, 2021 New section
Sec. 2 July 1, 2021 New section
Sec. 3 July 1, 2021 New section
Sec. 4 July 1, 2021 New section
Sec. 5 July 1, 2021 31-50a Raised Bill No. 906
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Statement of Purpose:
To set certain requirements for covenants not to compete.
[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except
that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not
underlined.]