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