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General Assembly Raised Bill No. 6594
January Session, 2023
LCO No. 3545
Referred to Committee on LABOR AND PUBLIC EMPLOYEES
Introduced by:
(LAB)
AN ACT CONCERNING NONCOMPETE AGREEMENTS.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. (NEW) (Effective July 1, 2023) As used in this section and 1
sections 2 to 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, excluding any overtime or bonus compensation, and (B) 5
health insurance benefits and other fringe benefits received by an 6
employee over the course of the prior calendar year; 7
(2) "Covenant not to compete" means a contract, provision or other 8
agreement entered into, amended, extended or renewed on or after July 9
1, 2023, that restrains, or imposes penalties on, a worker from engaging 10
in any lawful profession, occupation, trade, calling or business of any 11
kind in any geographic area of the state for any period of time after 12
separation from employment, but does not mean (A) a nonsolicitation 13
agreement, provided such agreement (i) does not restrict a worker's 14
activities for more than one year, and (ii) is no more restrictive than 15 Raised Bill No. 6594
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necessary in duration, geographic scope, type of work and type of 16
employer, (B) a nondisclosure or confidentiality agreement, (C) a 17
contract, provision or other agreement in which an employee agrees not 18
to reapply for employment with an employer after being terminated by 19
such employer, (D) any covenant not to compete, pursuant to sections 20
20-14p, 20-68i and 30-50b of the general statutes, or (E) any contract, 21
provision or other agreement made (i) in anticipation of a sale of the 22
goodwill of a business or all of the seller's ownership interest in a 23
business, or (ii) as part of a partnership or ownership agreement; 24
(3) "Employee" means any individual employed or permitted to work 25
by an employer; 26
(4) "Employer" has the same meaning as provided in section 31-71a 27
of the general statutes; 28
(5) "Exclusivity agreement" means a contract, provision or other 29
agreement entered into, amended, extended or renewed on or after July 30
1, 2023, that restrains a worker from, or imposes a penalty on a worker 31
for being simultaneously employed by another employer, working as 32
an independent contractor or being self-employed; 33
(6) "Exempt employee" means an employee not included in the 34
definition of "employee" in section 31-58 of the general statutes; 35
(7) "Legitimate business interest" means an interest in (A) the 36
protection of trade secrets or confidential information that does not 37
qualify as a trade secret, or (B) preserving established goodwill with the 38
employer's customers; 39
(8) "Minimum fair wage" has the same meaning as provided in 40
section 31-58 of the general statutes; 41
(9) "Monetary compensation" means (A) wages, as defined in section 42
31-71a of the general statutes, earned over the course of the prior 43
calendar year or portion thereof, for which the employee was employed, 44
annualized based on the period of employment and calculated as of (i) 45 Raised Bill No. 6594
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the date enforcement of the covenant not to compete is sought, or (ii) the 46
date of separation from employment, whichever is earlier, and (B) 47
payments made to independent contractors based on services rendered, 48
annualized based on the period during which the independent 49
contractor provided services and calculated as of (i) the date 50
enforcement of the covenant not to compete is sought, or (ii) the date of 51
separation from employment, whichever is earlier; 52
(10) "Nonsolicitation agreement" means (A) a contract, provision or 53
other agreement between an employer and an employee that prohibits 54
such employee, upon separation of employment, from soliciting (i) any 55
employee of the employer to leave the employer, or (ii) any customer of 56
the employer to cease or reduce the extent to which it is doing business 57
with the employer, or (B) a contract, provision or other agreement 58
between an employer and a customer of such employer that prohibits 59
such customer from soliciting an employee of the employer to cease or 60
reduce the extent to which such employee is doing business with the 61
employer; 62
(11) "Separation from employment" means the date in which an 63
employment or independent contractor relationship ends; and 64
(12) "Worker" means an employee or an independent contractor. 65
Sec. 2. (NEW) (Effective July 1, 2023) (a) No covenant not to compete 66
shall be enforceable against a worker unless all of the following 67
conditions are met: 68
(1) The covenant not to compete restricts such worker's competitive 69
activities for a period of not more than one year following the separation 70
of employment; 71
(2) The covenant not to compete is necessary to protect a "legitimate 72
business interest" of the employer and such legitimate business interest 73
could not reasonably be protected by less restrictive means, including, 74
but not limited to, a nondisclosure agreement, nonsolicitation 75
agreement or reliance on the protections provided by the provisions of 76 Raised Bill No. 6594
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chapter 625 of the general statutes; 77
(3) The covenant not to compete is no more restrictive than necessary 78
to protect a legitimate business interest in terms of the duration, 79
geographic scope, type of work and type of employer of the covenant 80
not to compete; 81
(4) The worker is an exempt employee; 82
(5) A written copy of the covenant not to compete is provided to the 83
worker not later than ten business days prior to (A) the worker's 84
deadline to accept an offer of employment or to enter into an 85
independent contractor relationship, or (B) the date the covenant not to 86
compete is signed, whichever is earlier; 87
(6) The covenant not to compete contains a statement of the worker's 88
rights under the covenant not to compete, provided such statement shall 89
include the following: (A) Not all covenants not to compete are 90
enforceable, (B) a covenant not to compete for a worker whose monetary 91
compensation is less than the amount described in subsection (b) of this 92
section is illegal, (C) a worker may contact the Attorney General if such 93
worker believes they are subject to an illegal covenant not to compete, 94
and (D) a worker has the right to consult with counsel prior to signing a 95
covenant not to compete; 96
(7) The covenant not to compete is signed by the worker and the 97
employer or contractor separately from any other agreement 98
establishing the relationship between the worker and the employer or 99
contractor; 100
(8) If the covenant not to compete is added to an existing employment 101
or independent contractor relationship, the covenant not to compete is 102
supported by sufficient consideration and is not solely the continuation 103
of such employment or contractor relationship; 104
(9) The employment or contract relationship was not terminated by 105
the worker for good cause attributable to the employer or contractor; 106 Raised Bill No. 6594
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(10) The covenant not to compete does not require a worker to submit 107
to adjudication in a forum outside of this state or otherwise deprive such 108
worker of the protections or benefits of this section; and 109
(11) The covenant not to compete does not unreasonably interfere 110
with the public interest and is consistent with the provisions of this 111
section, other laws of this state and public policy. 112
(b) No covenant not to compete shall be unenforceable against a 113
worker if such worker is (1) an employee whose monetary 114
compensation is less than three times the minimum fair wage, or (2) an 115
independent contractor whose monetary compensation is less than five 116
times such minimum fair wage. 117
(c) A covenant not to compete shall be presumed unenforceable if 118
such covenant applies to (1) geographic areas in which a worker neither 119
provided services nor had a material presence or influence within the 120
last two years of employment, or (2) types of work that the worker did 121
not perform during the last two years of employment. 122
(d) Notwithstanding the provisions of subdivision (1) of subsection 123
(a) of this section, a covenant not to compete shall be enforceable for a 124
period of not longer than two years following separation from 125
employment if such covenant not to compete is a part of an agreement 126
under which the worker is compensated with the worker's base salary 127
and benefits, minus any outside compensation, for the entire duration 128
of such covenant not to compete. 129
Sec. 3. (NEW) (Effective July 1, 2023) (a) Except as provided in 130
subsection (b) of this section, no employer or contractor may request or 131
require a worker to sign or agree to an exclusivity agreement, unless 132
such worker is (1) an "exempt employee" whose monetary 133
compensation is more than three times the minimum fair wage, or (2) 134
an independent contractor whose monetary compensation is more than 135
five times the minimum fair wage. 136
(b) An employer or contractor may request or require a worker to sign 137 Raised Bill No. 6594
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an exclusivity agreement if such worker's additional employment, work 138
as an independent contractor or being self-employed would (1) imperil 139
the safety of such worker, such worker's coworkers or the public, or (2) 140
substantially interfere with the reasonable and normal scheduling 141
expectations for such worker, except on-call shift scheduling shall not 142
be considered a reasonable scheduling expectation for the purposes of 143
this subsection. 144
(c) The provisions of this section shall not be construed to alter any 145
obligations of an employee to an employer under existing law, 146
including, but not limited to, the common law duty of loyalty, laws 147
preventing conflicts of interest and any corresponding policies 148
addressing such obligations. 149
Sec. 4. (NEW) (Effective July 1, 2023) (a) (1) The party seeking to 150
enforce a covenant not to compete or an exclusivity agreement against 151
a worker shall have the burden of proof in any enforcement proceeding 152
for such covenant not to compete or exclusivity agreement. 153
(2) The party required to compensate a worker in an agreement 154
described in subsection (d) of section 2 of this act shall have the burden 155
of proof in any proceeding to cease compensating a worker. 156
(b) No court may modify a covenant not to compete that violates the 157
provisions of sections 1 to 3, inclusive, of this act for purposes of 158
enforcing such covenant not to compete. 159
(c) If a covenant not to compete or an exclusivity agreement is held 160
unenforceable under sections 1 to 3, inclusive, of this act, any severable 161
provision of a contract or other agreement unrelated to such covenant 162
not to compete shall remain in full force and effect, including, but not 163
limited to, any provisions that require the payment of damages 164
resulting from any injury suffered by separation of employment. 165
(d) The Attorney General may bring a civil action in Superior Court 166
on behalf of any worker aggrieved by a violation of any provision of 167
sections 1 to 3, inclusive, of this act for any and all relief provided in this 168 Raised Bill No. 6594
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section. 169
(e) If a court or an arbitrator determines that a covenant not to 170
compete or an exclusivity agreement in sections 1 to 3, inclusive, of this 171
act, the violator shall be liable for (1) the aggrieved worker's actual 172
damages, or (2) a penalty of five thousand dollars, whichever is greater, 173
in addition to reasonable attorney's fees, expenses and court costs. 174
(f) No employer, officer, agent or other person who violates any 175
provision of this section shall be liable for an additional penalty under 176
section 31-69 of the general statutes. 177
Sec. 5. Section 31-50a of the general statutes is repealed and the 178
following is substituted in lieu thereof (Effective July 1, 2023): 179
(a) No employer may require any person employed in the 180
classification 339032 of the standard occupational classification system 181
of the Bureau of Labor Statistics of the United States Department of 182
Labor to enter into an agreement prohibiting such person from engaging 183
in the same or a similar job, at the same location at which the employer 184
employs such person, for another employer or as a self-employed 185
person, unless the employer proves that such person has obtained trade 186
secrets, as defined in subsection (d) of section 35-51, of the employer. 187
(b) (1) Any person who is aggrieved by a violation of this section may 188
bring a civil action in the Superior Court to recover damages and for 189
such injunctive and equitable relief as the court deems appropriate. 190
(2) The Labor Commissioner may request the Attorney General to 191
bring an action in the superior court for the judicial district of Hartford 192
for restitution on behalf of any person injured by any violation of this 193
section and for such injunctive or equitable relief as the court deems 194
appropriate. 195
(c) The provisions of this section shall apply to agreements entered 196
into, renewed or extended on or after October 1, 2007, and before July 1, 197
2023. 198 Raised Bill No. 6594
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This act shall take effect as follows and shall amend the following
sections:
Section 1 July 1, 2023 New section
Sec. 2 July 1, 2023 New section
Sec. 3 July 1, 2023 New section
Sec. 4 July 1, 2023 New section
Sec. 5 July 1, 2023 31-50a
Statement of Purpose:
To set certain requirements for covenants not to compete and exclusivity
agreements.
[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.]