Connecticut businesses can’t compete without noncompete agreements

(April 13, 2007) This week, the Judiciary Committee decided that employers in Connecticut can’t require certain employees to sign a noncompete agreement when they are seeking a similar job at another company, except in limited circumstances.

The committee approved HB-6989, which unfortunately could open the door to the banning of noncompete agreements in Connecticut.

HB-6989 was adopted with substitute language that was poorly drafted and contains major flaws that will only harm the ability of Connecticut businesses to fully compete, ultimately weakening the state’s business climate.

The bill does not clearly define the terms “same location” or “same or similar job,” making it difficult to determine how the proposal would interact with existing law regarding the use of noncompete agreements.

An employer can only enforce a noncompete agreement if it can prove that the employee has obtained trade secrets, which is very difficult to prove.

Does “same location” mean within a 15-mile radius, for example, or does it pertain to the same sales territory? What’s more, in many Connecticut cities, competitors in the same industry often co-exist in business districts or business parks.

If enacted, the bill likely will lead to extended and expensive litigation over the meaning of same or similar location, creating greater, rather than less, uncertainty over the enforceability of contracts.

Connecticut courts have repeatedly ruled that noncompete agreements are enforceable when reasonable and necessary to protect a legitimate business interest.

In fact, in 2000, the legislature’s Law Revision Commission recommended that the legislature “take no action [regarding the enforceability of noncompetes] and allow the courts, which are in the best position to determine the appropriate outcome in each case, to further develop the law in this area as changes in the business community occur and new situations arise.”

Restricting the use of noncompete agreements will place Connecticut employers at a competitive disadvantage. And that will discourage businesses, especially small start-up companies, from doing business in the state at a time when the state economy needs to attract and retain businesses.

Connecticut lags far behind many other states in job creation and economic growth. That’s why CBIA encourages its members to contact their legislators and tell them “Don’t make it harder for us to stay, expand and relocate here.”

For more information, contact CBIA’s Kia Floyd at 860-244-1931 or floydk@cbia.com.

CBIA Action Center

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