Connecticut 2025 Regular Session

Connecticut House Bill HB07196 Compare Versions

Version 1 (Old)

Version 2 (New)

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3		-	LCO 1 of 10
	3	+	LCO No. 5894 1 of 10
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5		-	General Assembly ~~Substitute~~ Bill No. 7196
	5	+	General Assembly Raised Bill No. 7196
6	6		January Session, 2025
	7	+	LCO No. 5894
	8	+
	9	+
	10	+	Referred to Committee on LABOR AND PUBLIC EMPLOYEES
	11	+
	12	+
	13	+	Introduced by:
	14	+	(LAB)
	15	+
7	16
8	17
9	18
10	19		AN ACT CONCERNING LIMITATIONS ON THE USE OF
11	20		NONCOMPETE AGREEMENTS.
12	21		Be it enacted by the Senate and House of Representatives in General
13	22		Assembly convened:
14	23
15	24		Section 1. (NEW) (Effective July 1, 2025) As used in this section and 1
16	25		sections 2 to 6, inclusive, of this act: 2
17	26		(1) "Annualized monetary compensation" means (A) wages earned 3
18	27		over the course of the prior calendar year, or portion thereof, for which 4
19	28		the employee was employed, annualized based on the period of 5
20	29		employment and calculated as of (i) the date that enforcement of the 6
21	30		covenant not to compete is sought, or (ii) the date of separation from 7
22	31		employment, whichever is earlier, and (B) payments made to 8
23	32		independent contractors based on services rendered, annualized based 9
24	33		on the period during which the independent contractor provided 10
25	34		services and calculated as of (i) the date that enforcement of the 11
26	35		covenant not to compete is sought, or (ii) the date of separation from 12
27	36		employment, whichever is earlier; 13
28	37		(2) "Base salary and benefits" means (A) wages earned by an 14
29	38		employee over the course of the prior calendar year, and (B) health 15
	39	+	Raised Bill No. 7196
	40	+
	41	+
	42	+
	43	+	LCO No. 5894 2 of 10
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30	45		insurance benefits and other fringe benefits received by an employee 16
31	46		over the course of the prior calendar year. "Base salary and benefits" 17
32	47		does not include overtime or bonus compensation received by an 18
33		-	employee; 19 Substitute Bill No. 7196
34		-
35		-
36		-	LCO 2 of 10
37		-
	48	+	employee; 19
38	49		(3) "Covenant not to compete" means a contract, provision or other 20
39	50		agreement entered into, amended, extended or renewed on or after July 21
40	51		1, 2025, that, for any period of time after separation from employment, 22
41	52		restrains a worker from, or imposes penalties on a worker for, engaging 23
42	53		in any lawful profession, occupation, trade, calling or business of any 24
43	54		kind in any geographic area of the state. "Covenant not to compete" does 25
44	55		not include: 26
45	56		(A) A nonsolicitation agreement, provided such agreement (i) does 27
46	57		not restrict a worker's activities for more than one year, and (ii) is no 28
47	58		more restrictive than necessary in duration, geographic scope, type of 29
48	59		work and type of employer; 30
49	60		(B) A nondisclosure or confidentiality agreement; 31
50	61		(C) A contract, contract provision or other agreement in which an 32
51	62		employee agrees to not reapply for employment with an employer after 33
52	63		being terminated by such employer; 34
53	64		(D) Any covenant not to compete, described in sections 20-14p, 20-35
54	65		670 and 31-50b of the general statutes; or 36
55	66		(E) Any contract, contract provision or other agreement made either 37
56	67		(i) in anticipation of a sale of the goodwill of a business or all of the 38
57	68		seller's ownership interest in a business, or (ii) as part of a partnership 39
58	69		or ownership agreement; 40
59	70		(4) "Employee" means any individual employed or permitted to work 41
60	71		by an employer; 42
61	72		(5) "Employer" has the same meaning as provided in section 31-71a 43
62	73		of the general statutes; 44
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	78	+	LCO No. 5894 3 of 10
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63	80		(6) "Exclusivity agreement" means a contract, contract provision or 45
64	81		other agreement entered into, amended, extended or renewed on or 46
65	82		after July 1, 2025, that restrains a worker from, or imposes a penalty on 47
66	83		a worker for, (A) being simultaneously employed by the employer and 48
67		-	another employer, (B) working as an independent contractor while 49 Substitute Bill No. 7196
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69		-
70		-	LCO 3 of 10
71		-
	84	+	another employer, (B) working as an independent contractor while 49
72	85		employed by the employer, or (C) being self-employed while employed 50
73	86		by the employer; 51
74	87		(7) "Exempt employee" means any employee who is exempt from the 52
75	88		minimum wage and overtime requirements of the Fair Labor Standards 53
76	89		Act of 1938, as amended from time to time; 54
77	90		(8) "Hourly wage" means, (A) for an hourly employee, such 55
78	91		employee's wages calculated on an hourly basis, and (B) for any other 56
79		-	~~worker~~, such ~~worker~~'s annualized monetary compensation ~~converted to~~ 57
80		-	an hourly rate by dividing such monetary compensation ~~by two~~ 58
81		-	thousand eighty; 59
	92	+	employee, such employee's annualized monetary compensation 57
	93	+	converted to an hourly rate by dividing such monetary compensation 58
	94	+	by two thousand eighty; 59
82	95		(9) "Legitimate business interest" means an employer's interest in the 60
83	96		protection of trade secrets or confidential information that does not 61
84	97		qualify as a trade secret or preserving established goodwill with such 62
85	98		employer's customers; 63
86	99		(10) "Minimum fair wage" has the same meaning as provided in 64
87	100		section 31-58 of the general statutes; 65
88	101		(11) "Nonsolicitation agreement" means (A) a contract, contract 66
89	102		provision or other agreement between an employer and an employee 67
90	103		that prohibits, upon separation of employment, such employee from 68
91	104		soliciting any (i) employee of such employer to leave the employer, or 69
92	105		(ii) customer of such employer to cease or reduce the extent to which 70
93	106		such customer is doing business with such employer, or (B) a contract, 71
94	107		contract provision or other agreement between an employer and a 72
95	108		customer of such employer that prohibits such customer from soliciting 73
96	109		an employee of such employer to cease or reduce the extent to which 74
97	110		such employee is doing work with such employer; 75
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	115	+	LCO No. 5894 4 of 10
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98	117		(12) "Separation from employment" means the date on which an 76
99	118		employment relationship terminates between an employer or contractor 77
100	119		and a worker; 78
101		-	(13) "Wages" has the same meaning as provided in section 31-58 of 79 Substitute Bill No. 7196
102		-
103		-
104		-	LCO 4 of 10
105		-
	120	+	(13) "Wages" has the same meaning as provided in section 31-58 of 79
106	121		the general statutes; and 80
107	122		(14) "Worker" means an employee or an independent contractor. 81
108	123		Sec. 2. (NEW) (Effective July 1, 2025) (a) A covenant not to compete 82
109	124		shall be void and unenforceable against a worker if (1) such worker is 83
110	125		(A) an employee whose hourly wage is less than three times the 84
111	126		minimum fair wage, or (B) an independent contractor whose hourly 85
112	127		wage is less than five times the minimum fair wage, or (2) such covenant 86
113	128		not to compete applies to (A) geographic areas in which a worker 87
114	129		neither provided services nor had a material presence or influence 88
115	130		during the two years prior to such worker's separation from 89
116	131		employment, or (B) types of work that the worker did not perform 90
117	132		during the two years prior to such worker's separation from 91
118	133		employment. 92
119	134		(b) A covenant not to compete may be enforceable against a worker 93
120	135		if such worker is (1) an employee whose hourly wage is three times or 94
121	136		more than the minimum fair wage, or (2) an independent contractor 95
122	137		whose hourly wage is five times or more than the minimum fair wage, 96
123	138		provided the following conditions are met: 97
124	139		(A) The covenant not to compete restricts such worker's competitive 98
125	140		activities for a period of not more than one year following the separation 99
126	141		from employment, except a covenant not to compete may be enforceable 100
127	142		for a period not to exceed two years following the separation from 101
128	143		employment if such covenant not to compete is part of an agreement in 102
129	144		which the worker is compensated with such worker's base salary and 103
130	145		benefits, minus any outside compensation, for the entire duration of 104
131	146		such covenant not to compete; 105
	147	+	Raised Bill No. 7196
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	151	+	LCO No. 5894 5 of 10
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132	153		(B) The covenant not to compete is necessary to protect a legitimate 106
133	154		business interest of the employer, provided (i) such legitimate business 107
134	155		interest could not reasonably be protected by less restrictive means, 108
135	156		including, but not limited to, a nondisclosure agreement, a 109
136	157		nonsolicitation agreement or reliance on the protections provided by the 110
137		-	provisions of chapter 625 of the general statutes, and (ii) the covenant 111 Substitute Bill No. 7196
138		-
139		-
140		-	LCO 5 of 10
141		-
	158	+	provisions of chapter 625 of the general statutes, and (ii) the covenant 111
142	159		not to compete is no more restrictive than necessary to protect such 112
143	160		legitimate business interest in terms of the duration, geographic scope, 113
144	161		type of work and type of employer of the covenant not to compete; 114
145	162		(C) The worker subject to the covenant not to compete is an exempt 115
146	163		employee; 116
147	164		(D) A written copy of the covenant not to compete is provided to the 117
148	165		worker not later than ten business days prior to (i) the worker's deadline 118
149	166		to accept an offer of employment, or enter into an independent 119
150	167		contractor relationship, or (ii) the date the covenant not to compete is 120
151	168		signed, whichever is earlier, and such written copy includes a statement 121
152	169		of the worker's rights that contains the following: 122
153	170		(I) Not all covenants not to compete are enforceable against a worker; 123
154	171		(II) A covenant not to compete for a worker whose hourly wage is 124
155	172		less than the amount described in subsection (a) of this section is not 125
156	173		enforceable; 126
157	174		(III) A worker may contact the Attorney General if such worker 127
158	175		believes they are subject to a covenant not to compete in violation of this 128
159	176		section; and 129
160	177		(IV) A worker has the right to consult with counsel prior to signing a 130
161	178		covenant not to compete; 131
162	179		(E) The covenant not to compete is signed by the worker and the 132
163	180		employer or contractor separately from any other agreement 133
164	181		establishing the relationship between the worker and the employer or 134
	182	+	Raised Bill No. 7196
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	184	+
	185	+
	186	+	LCO No. 5894 6 of 10
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165	188		contractor; 135
166	189		(F) If the covenant not to compete is added to an existing employment 136
167	190		or independent contractor agreement, such covenant not to compete is 137
168	191		supported by sufficient consideration and is not the sole basis of the 138
169	192		continuation of such employment or contractor relationship; 139
170		-	(G) The employment or contract relationship was not terminated by 140 Substitute Bill No. 7196
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172		-
173		-	LCO 6 of 10
174		-
	193	+	(G) The employment or contract relationship was not terminated by 140
175	194		the worker for good cause attributable to the employer or contractor; 141
176	195		(H) The covenant not to compete does not require a worker to submit 142
177	196		to adjudication in a forum outside of this state or otherwise deprive such 143
178	197		worker of the protections or benefits of this section; and 144
179	198		(I) The covenant not to compete does not unreasonably interfere with 145
180	199		the public interest and is consistent with the provisions of this section, 146
181	200		other laws of this state and public policy. 147
182	201		Sec. 3. (NEW) (Effective July 1, 2025) (a) No employer or contractor 148
183	202		shall request or require a worker to sign or agree to an exclusivity 149
184	203		agreement unless: 150
185	204		(1) The worker is (A) an exempt employee whose hourly wage is 151
186	205		more than three times the minimum fair wage, or (B) an independent 152
187	206		contractor whose hourly wage is more than five times the minimum fair 153
188	207		wage; or 154
189	208		(2) The worker's additional employment, self-employment or work 155
190	209		as an independent contractor would (A) imperil the safety of such 156
191	210		worker, such worker's coworkers or the public, or (B) substantially 157
192	211		interfere with the reasonable and normal scheduling expectations for 158
193	212		such worker. On-call shift scheduling shall not be considered a 159
194	213		reasonable scheduling expectation for the purposes of this subdivision. 160
195	214		(b) Nothing in this section shall be construed to alter any obligations 161
196	215		of a worker to an employer under existing law, including, but not 162
197	216		limited to, the common law duty of loyalty, laws preventing conflicts of 163
	217	+	Raised Bill No. 7196
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	221	+	LCO No. 5894 7 of 10
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198	223		interest and any corresponding policies addressing such obligations. 164
199	224		Sec. 4. (NEW) (Effective July 1, 2025) (a) No court shall modify a 165
200	225		covenant not to compete or an exclusivity agreement that violates the 166
201	226		provisions of section 2 or 3 of this act for the purposes of enforcing such 167
202	227		covenant not to compete or exclusivity agreement. 168
203	228		(b) If a covenant not to compete or an exclusivity agreement is held 169
204		-	unenforceable by a court under section 2 or 3 of this act, any severable 170 Substitute Bill No. 7196
205		-
206		-
207		-	LCO 7 of 10
208		-
	229	+	unenforceable by a court under section 2 or 3 of this act, any severable 170
209	230		provision of a contract or other agreement unrelated to such covenant 171
210	231		not to compete shall remain in full force and effect, including, but not 172
211	232		limited to, any provisions that require the payment of damages 173
212	233		resulting from any injury suffered by separation from employment. 174
213	234		(c) The party seeking to enforce a covenant not to compete or an 175
214	235		exclusivity agreement against a worker shall have the burden of proof 176
215	236		in any enforcement proceeding for such covenant not to compete or 177
216	237		exclusivity agreement. 178
217	238		(d) The party required to compensate a worker in an agreement in 179
218	239		which a worker is compensated with such worker's base salary and 180
219	240		benefits, minus any outside compensation, for the entire duration of the 181
220	241		covenant not to compete shall have the burden of proof in any 182
221	242		proceeding to cease compensating such worker. 183
222	243		Sec. 5. (NEW) (Effective July 1, 2025) (a) Any worker aggrieved by a 184
223	244		violation of the provisions of section 2 or 3 of this act may bring a civil 185
224	245		action in the superior court for the judicial district where the violation is 186
225	246		alleged to have occurred to recover damages, civil penalties and such 187
226	247		equitable and injunctive relief as the court deems appropriate. Any 188
227	248		person who prevails in such civil action may be awarded reasonable 189
228	249		costs and attorney's fees to be taxed by the court. 190
229	250		(b) In any such action if the court finds that a covenant not to compete 191
230	251		or an exclusivity agreement is in violation of section 2 or 3 of this act, 192
231	252		the court may assess a civil penalty against the violator in an amount 193
	253	+	Raised Bill No. 7196
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	255	+
	256	+
	257	+	LCO No. 5894 8 of 10
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232	259		not exceeding five thousand dollars. 194
233	260		Sec. 6. (NEW) (Effective July 1, 2025) (a) The Attorney General may 195
234	261		investigate, intervene or bring a civil action in the name of the state, 196
235	262		seeking injunctive or declaratory relief, damages and any other relief 197
236	263		that may be available under law, whenever any employer or contractor 198
237	264		is or has engaged in a practice or pattern of conduct that: 199
238	265		(1) Subjects, or causes to be subjected, workers to a covenant not to 200
239		-	compete that is in violation of section 2 of this act; or 201 Substitute Bill No. 7196
240		-
241		-
242		-	LCO 8 of 10
243		-
	266	+	compete that is in violation of section 2 of this act; or 201
244	267		(2) Subjects, or causes to be subjected, workers to an exclusivity 202
245	268		agreement that is in violation of section 3 of this act. 203
246	269		(b) In conducting any investigation under this section, the Attorney 204
247	270		General may issue subpoenas and interrogatories, and otherwise gather 205
248	271		information, in the same manner and to the same extent as is provided 206
249	272		in section 35-42 of the general statutes. No information obtained 207
250	273		pursuant to the provisions of this subsection may be used in a criminal 208
251	274		proceeding. 209
252	275		(c) If the Attorney General prevails in a civil action brought pursuant 210
253	276		to this section, the court shall order the distribution of any award of 211
254	277		damages to the injured worker. The court may also award civil penalties 212
255	278		against each defendant in an amount not exceeding five thousand 213
256	279		dollars. No employer or contractor, officer or agent that is found to have 214
257	280		violated the provisions of section 2 or 3 of this act shall be liable for an 215
258	281		additional penalty under section 31-69 of the general statutes. 216
259	282		(d) In lieu of bringing a civil action under this section, the Attorney 217
260	283		General may accept an assurance of the discontinuance of any alleged 218
261	284		unlawful practice from any employer engaged in such practice. 219
262	285		Thereafter, any evidence of a violation of such assurance shall constitute 220
263	286		prima facie proof of a violation of the applicable law in any action 221
264	287		commenced by the Attorney General. 222
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265	294		(e) Nothing in this section shall permit the Attorney General to bring 223
266	295		an action that would otherwise be barred under the applicable statute 224
267	296		of limitations. 225
268	297		(f) The Attorney General shall post on the Attorney General's Internet 226
269	298		web site information on how to file a complaint with the Attorney 227
270	299		General for an alleged violation of section 2 or 3 of this act. 228
271	300		(g) Nothing in this section shall permit the Attorney General to assert 229
272	301		any claim against a state agency or a state officer or state employee in 230
273	302		such officer's or employee's official capacity, regarding actions or 231
274		-	omissions of such state agency, state officer or state employee. If the 232 Substitute Bill No. 7196
275		-
276		-
277		-	LCO 9 of 10
278		-
	303	+	omissions of such state agency, state officer or state employee. If the 232
279	304		Attorney General determines that a state officer or state employee is not 233
280	305		entitled to indemnification under section 5-141d of the general statutes, 234
281	306		the Attorney General may, as it relates to such officer or employee, take 235
282	307		any action authorized under this section. 236
283	308		Sec. 7. Section 31-50a of the general statutes is repealed and the 237
284	309		following is substituted in lieu thereof (Effective July 1, 2025): 238
285	310		(a) No employer may require any person employed in the 239
286	311		classification 339032 of the standard occupational classification system 240
287	312		of the Bureau of Labor Statistics of the United States Department of 241
288	313		Labor to enter into an agreement prohibiting such person from engaging 242
289	314		in the same or a similar job, at the same location at which the employer 243
290	315		employs such person, for another employer or as a self-employed 244
291	316		person, unless the employer proves that such person has obtained trade 245
292	317		secrets, as defined in subsection (d) of section 35-51, of the employer. 246
293	318		(b) (1) Any person who is aggrieved by a violation of this section may 247
294	319		bring a civil action in the Superior Court to recover damages and for 248
295	320		such injunctive and equitable relief as the court deems appropriate. 249
296	321		(2) The Labor Commissioner may request the Attorney General to 250
297	322		bring an action in the superior court for the judicial district of Hartford 251
298	323		for restitution on behalf of any person injured by any violation of this 252
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	328	+	LCO No. 5894 10 of 10
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299	330		section and for such injunctive or equitable relief as the court deems 253
300	331		appropriate. 254
301	332		(c) The provisions of this section shall apply to agreements entered 255
302	333		into, renewed or extended on or after October 1, 2007, and before July 1, 256
303	334		2025. 257
304	335		This act shall take effect as follows and shall amend the following
305	336		sections:
306	337
307	338		Section 1 July 1, 2025 New section
308	339		Sec. 2 July 1, 2025 New section
309	340		Sec. 3 July 1, 2025 New section
310		-	Sec. 4 July 1, 2025 New section Substitute Bill No. 7196
311		-
312		-
313		-	LCO 10 of 10
314		-
	341	+	Sec. 4 July 1, 2025 New section
315	342		Sec. 5 July 1, 2025 New section
316	343		Sec. 6 July 1, 2025 New section
317	344		Sec. 7 July 1, 2025 31-50a
318	345
319		-	Statement of ~~Legislative Commissioners~~:
320		-	~~In Section 1, Subdiv. (8) "employee" was changed~~ to ~~"worker"~~ and
321		-	~~"employee's" was changed to "worker's" for clarity and accuracy~~.
	346	+	Statement of Purpose:
	347	+	To prohibit the use of noncompete agreements and exclusivity
	348	+	agreements unless they meet certain requirements.
322	349
323		-	LAB Joint Favorable Subst. -LCO
	350	+	[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except
	351	+	that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not
	352	+	underlined.]
324	353