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General Assembly Raised Bill No. 7196
January Session, 2025
LCO No. 5894
Referred to Committee on LABOR AND PUBLIC EMPLOYEES
Introduced by:
(LAB)
AN ACT CONCERNING LIMITATIONS ON THE USE OF
NONCOMPETE AGREEMENTS.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. (NEW) (Effective July 1, 2025) As used in this section and 1
sections 2 to 6, inclusive, of this act: 2
(1) "Annualized monetary compensation" means (A) wages earned 3
over the course of the prior calendar year, or portion thereof, for which 4
the employee was employed, annualized based on the period of 5
employment and calculated as of (i) the date that enforcement of the 6
covenant not to compete is sought, or (ii) the date of separation from 7
employment, whichever is earlier, and (B) payments made to 8
independent contractors based on services rendered, annualized based 9
on the period during which the independent contractor provided 10
services and calculated as of (i) the date that enforcement of the 11
covenant not to compete is sought, or (ii) the date of separation from 12
employment, whichever is earlier; 13
(2) "Base salary and benefits" means (A) wages earned by an 14
employee over the course of the prior calendar year, and (B) health 15
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insurance benefits and other fringe benefits received by an employee 16
over the course of the prior calendar year. "Base salary and benefits" 17
does not include overtime or bonus compensation received by an 18
employee; 19
(3) "Covenant not to compete" means a contract, provision or other 20
agreement entered into, amended, extended or renewed on or after July 21
1, 2025, that, for any period of time after separation from employment, 22
restrains a worker from, or imposes penalties on a worker for, engaging 23
in any lawful profession, occupation, trade, calling or business of any 24
kind in any geographic area of the state. "Covenant not to compete" does 25
not include: 26
(A) A nonsolicitation agreement, provided such agreement (i) does 27
not restrict a worker's activities for more than one year, and (ii) is no 28
more restrictive than necessary in duration, geographic scope, type of 29
work and type of employer; 30
(B) A nondisclosure or confidentiality agreement; 31
(C) A contract, contract provision or other agreement in which an 32
employee agrees to not reapply for employment with an employer after 33
being terminated by such employer; 34
(D) Any covenant not to compete, described in sections 20-14p, 20-35
670 and 31-50b of the general statutes; or 36
(E) Any contract, contract provision or other agreement made either 37
(i) in anticipation of a sale of the goodwill of a business or all of the 38
seller's ownership interest in a business, or (ii) as part of a partnership 39
or ownership agreement; 40
(4) "Employee" means any individual employed or permitted to work 41
by an employer; 42
(5) "Employer" has the same meaning as provided in section 31-71a 43
of the general statutes; 44
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(6) "Exclusivity agreement" means a contract, contract provision or 45
other agreement entered into, amended, extended or renewed on or 46
after July 1, 2025, that restrains a worker from, or imposes a penalty on 47
a worker for, (A) being simultaneously employed by the employer and 48
another employer, (B) working as an independent contractor while 49
employed by the employer, or (C) being self-employed while employed 50
by the employer; 51
(7) "Exempt employee" means any employee who is exempt from the 52
minimum wage and overtime requirements of the Fair Labor Standards 53
Act of 1938, as amended from time to time; 54
(8) "Hourly wage" means, (A) for an hourly employee, such 55
employee's wages calculated on an hourly basis, and (B) for any other 56
employee, such employee's annualized monetary compensation 57
converted to an hourly rate by dividing such monetary compensation 58
by two thousand eighty; 59
(9) "Legitimate business interest" means an employer's interest in the 60
protection of trade secrets or confidential information that does not 61
qualify as a trade secret or preserving established goodwill with such 62
employer's customers; 63
(10) "Minimum fair wage" has the same meaning as provided in 64
section 31-58 of the general statutes; 65
(11) "Nonsolicitation agreement" means (A) a contract, contract 66
provision or other agreement between an employer and an employee 67
that prohibits, upon separation of employment, such employee from 68
soliciting any (i) employee of such employer to leave the employer, or 69
(ii) customer of such employer to cease or reduce the extent to which 70
such customer is doing business with such employer, or (B) a contract, 71
contract provision or other agreement between an employer and a 72
customer of such employer that prohibits such customer from soliciting 73
an employee of such employer to cease or reduce the extent to which 74
such employee is doing work with such employer; 75
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(12) "Separation from employment" means the date on which an 76
employment relationship terminates between an employer or contractor 77
and a worker; 78
(13) "Wages" has the same meaning as provided in section 31-58 of 79
the general statutes; and 80
(14) "Worker" means an employee or an independent contractor. 81
Sec. 2. (NEW) (Effective July 1, 2025) (a) A covenant not to compete 82
shall be void and unenforceable against a worker if (1) such worker is 83
(A) an employee whose hourly wage is less than three times the 84
minimum fair wage, or (B) an independent contractor whose hourly 85
wage is less than five times the minimum fair wage, or (2) such covenant 86
not to compete applies to (A) geographic areas in which a worker 87
neither provided services nor had a material presence or influence 88
during the two years prior to such worker's separation from 89
employment, or (B) types of work that the worker did not perform 90
during the two years prior to such worker's separation from 91
employment. 92
(b) A covenant not to compete may be enforceable against a worker 93
if such worker is (1) an employee whose hourly wage is three times or 94
more than the minimum fair wage, or (2) an independent contractor 95
whose hourly wage is five times or more than the minimum fair wage, 96
provided the following conditions are met: 97
(A) The covenant not to compete restricts such worker's competitive 98
activities for a period of not more than one year following the separation 99
from employment, except a covenant not to compete may be enforceable 100
for a period not to exceed two years following the separation from 101
employment if such covenant not to compete is part of an agreement in 102
which the worker is compensated with such worker's base salary and 103
benefits, minus any outside compensation, for the entire duration of 104
such covenant not to compete; 105
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(B) The covenant not to compete is necessary to protect a legitimate 106
business interest of the employer, provided (i) such legitimate business 107
interest could not reasonably be protected by less restrictive means, 108
including, but not limited to, a nondisclosure agreement, a 109
nonsolicitation agreement or reliance on the protections provided by the 110
provisions of chapter 625 of the general statutes, and (ii) the covenant 111
not to compete is no more restrictive than necessary to protect such 112
legitimate business interest in terms of the duration, geographic scope, 113
type of work and type of employer of the covenant not to compete; 114
(C) The worker subject to the covenant not to compete is an exempt 115
employee; 116
(D) A written copy of the covenant not to compete is provided to the 117
worker not later than ten business days prior to (i) the worker's deadline 118
to accept an offer of employment, or enter into an independent 119
contractor relationship, or (ii) the date the covenant not to compete is 120
signed, whichever is earlier, and such written copy includes a statement 121
of the worker's rights that contains the following: 122
(I) Not all covenants not to compete are enforceable against a worker; 123
(II) A covenant not to compete for a worker whose hourly wage is 124
less than the amount described in subsection (a) of this section is not 125
enforceable; 126
(III) A worker may contact the Attorney General if such worker 127
believes they are subject to a covenant not to compete in violation of this 128
section; and 129
(IV) A worker has the right to consult with counsel prior to signing a 130
covenant not to compete; 131
(E) The covenant not to compete is signed by the worker and the 132
employer or contractor separately from any other agreement 133
establishing the relationship between the worker and the employer or 134
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contractor; 135
(F) If the covenant not to compete is added to an existing employment 136
or independent contractor agreement, such covenant not to compete is 137
supported by sufficient consideration and is not the sole basis of the 138
continuation of such employment or contractor relationship; 139
(G) The employment or contract relationship was not terminated by 140
the worker for good cause attributable to the employer or contractor; 141
(H) The covenant not to compete does not require a worker to submit 142
to adjudication in a forum outside of this state or otherwise deprive such 143
worker of the protections or benefits of this section; and 144
(I) The covenant not to compete does not unreasonably interfere with 145
the public interest and is consistent with the provisions of this section, 146
other laws of this state and public policy. 147
Sec. 3. (NEW) (Effective July 1, 2025) (a) No employer or contractor 148
shall request or require a worker to sign or agree to an exclusivity 149
agreement unless: 150
(1) The worker is (A) an exempt employee whose hourly wage is 151
more than three times the minimum fair wage, or (B) an independent 152
contractor whose hourly wage is more than five times the minimum fair 153
wage; or 154
(2) The worker's additional employment, self-employment or work 155
as an independent contractor would (A) imperil the safety of such 156
worker, such worker's coworkers or the public, or (B) substantially 157
interfere with the reasonable and normal scheduling expectations for 158
such worker. On-call shift scheduling shall not be considered a 159
reasonable scheduling expectation for the purposes of this subdivision. 160
(b) Nothing in this section shall be construed to alter any obligations 161
of a worker to an employer under existing law, including, but not 162
limited to, the common law duty of loyalty, laws preventing conflicts of 163
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interest and any corresponding policies addressing such obligations. 164
Sec. 4. (NEW) (Effective July 1, 2025) (a) No court shall modify a 165
covenant not to compete or an exclusivity agreement that violates the 166
provisions of section 2 or 3 of this act for the purposes of enforcing such 167
covenant not to compete or exclusivity agreement. 168
(b) If a covenant not to compete or an exclusivity agreement is held 169
unenforceable by a court under section 2 or 3 of this act, any severable 170
provision of a contract or other agreement unrelated to such covenant 171
not to compete shall remain in full force and effect, including, but not 172
limited to, any provisions that require the payment of damages 173
resulting from any injury suffered by separation from employment. 174
(c) The party seeking to enforce a covenant not to compete or an 175
exclusivity agreement against a worker shall have the burden of proof 176
in any enforcement proceeding for such covenant not to compete or 177
exclusivity agreement. 178
(d) The party required to compensate a worker in an agreement in 179
which a worker is compensated with such worker's base salary and 180
benefits, minus any outside compensation, for the entire duration of the 181
covenant not to compete shall have the burden of proof in any 182
proceeding to cease compensating such worker. 183
Sec. 5. (NEW) (Effective July 1, 2025) (a) Any worker aggrieved by a 184
violation of the provisions of section 2 or 3 of this act may bring a civil 185
action in the superior court for the judicial district where the violation is 186
alleged to have occurred to recover damages, civil penalties and such 187
equitable and injunctive relief as the court deems appropriate. Any 188
person who prevails in such civil action may be awarded reasonable 189
costs and attorney's fees to be taxed by the court. 190
(b) In any such action if the court finds that a covenant not to compete 191
or an exclusivity agreement is in violation of section 2 or 3 of this act, 192
the court may assess a civil penalty against the violator in an amount 193
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not exceeding five thousand dollars. 194
Sec. 6. (NEW) (Effective July 1, 2025) (a) The Attorney General may 195
investigate, intervene or bring a civil action in the name of the state, 196
seeking injunctive or declaratory relief, damages and any other relief 197
that may be available under law, whenever any employer or contractor 198
is or has engaged in a practice or pattern of conduct that: 199
(1) Subjects, or causes to be subjected, workers to a covenant not to 200
compete that is in violation of section 2 of this act; or 201
(2) Subjects, or causes to be subjected, workers to an exclusivity 202
agreement that is in violation of section 3 of this act. 203
(b) In conducting any investigation under this section, the Attorney 204
General may issue subpoenas and interrogatories, and otherwise gather 205
information, in the same manner and to the same extent as is provided 206
in section 35-42 of the general statutes. No information obtained 207
pursuant to the provisions of this subsection may be used in a criminal 208
proceeding. 209
(c) If the Attorney General prevails in a civil action brought pursuant 210
to this section, the court shall order the distribution of any award of 211
damages to the injured worker. The court may also award civil penalties 212
against each defendant in an amount not exceeding five thousand 213
dollars. No employer or contractor, officer or agent that is found to have 214
violated the provisions of section 2 or 3 of this act shall be liable for an 215
additional penalty under section 31-69 of the general statutes. 216
(d) In lieu of bringing a civil action under this section, the Attorney 217
General may accept an assurance of the discontinuance of any alleged 218
unlawful practice from any employer engaged in such practice. 219
Thereafter, any evidence of a violation of such assurance shall constitute 220
prima facie proof of a violation of the applicable law in any action 221
commenced by the Attorney General. 222
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(e) Nothing in this section shall permit the Attorney General to bring 223
an action that would otherwise be barred under the applicable statute 224
of limitations. 225
(f) The Attorney General shall post on the Attorney General's Internet 226
web site information on how to file a complaint with the Attorney 227
General for an alleged violation of section 2 or 3 of this act. 228
(g) Nothing in this section shall permit the Attorney General to assert 229
any claim against a state agency or a state officer or state employee in 230
such officer's or employee's official capacity, regarding actions or 231
omissions of such state agency, state officer or state employee. If the 232
Attorney General determines that a state officer or state employee is not 233
entitled to indemnification under section 5-141d of the general statutes, 234
the Attorney General may, as it relates to such officer or employee, take 235
any action authorized under this section. 236
Sec. 7. Section 31-50a of the general statutes is repealed and the 237
following is substituted in lieu thereof (Effective July 1, 2025): 238
(a) No employer may require any person employed in the 239
classification 339032 of the standard occupational classification system 240
of the Bureau of Labor Statistics of the United States Department of 241
Labor to enter into an agreement prohibiting such person from engaging 242
in the same or a similar job, at the same location at which the employer 243
employs such person, for another employer or as a self-employed 244
person, unless the employer proves that such person has obtained trade 245
secrets, as defined in subsection (d) of section 35-51, of the employer. 246
(b) (1) Any person who is aggrieved by a violation of this section may 247
bring a civil action in the Superior Court to recover damages and for 248
such injunctive and equitable relief as the court deems appropriate. 249
(2) The Labor Commissioner may request the Attorney General to 250
bring an action in the superior court for the judicial district of Hartford 251
for restitution on behalf of any person injured by any violation of this 252
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section and for such injunctive or equitable relief as the court deems 253
appropriate. 254
(c) The provisions of this section shall apply to agreements entered 255
into, renewed or extended on or after October 1, 2007, and before July 1, 256
2025. 257
This act shall take effect as follows and shall amend the following
sections:
Section 1 July 1, 2025 New section
Sec. 2 July 1, 2025 New section
Sec. 3 July 1, 2025 New section
Sec. 4 July 1, 2025 New section
Sec. 5 July 1, 2025 New section
Sec. 6 July 1, 2025 New section
Sec. 7 July 1, 2025 31-50a
Statement of Purpose:
To prohibit the use of noncompete agreements and exclusivity
agreements unless they meet certain requirements.
[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.]