Bill Banning Noncompete Agreements Strikes Out

Legislation banning a range of noncompete agreements stalled earlier this month despite gaining approval from the legislature’s Labor and Public Employees Committee.

HB 5269, which the Labor Committee approved in March on an 8-4 party line vote, made noncompete and exclusivity agreements unenforceable under certain conditions.

However, the bill was referred by the House to the Judiciary Committee, which did not act on it before its deadline for reporting legislation, effectively killing the measure for this year.

HB 5269 made noncompete agreements unenforceable unless restricted to one year or less from the employee’s separation or if the noncompete was necessary to protect legitimate business interests, such as a nondisclosure or non-solicitation agreement. 

Civil Penalties

The bill also mandated that a noncompete must to be provided 10 days prior to the workers’ deadline to accept an employment offer, or 10 days before the agreement is signed.

Noncompetes must include a list of the employee’s rights, as well as be no more restrictive than necessary in duration, geographic scope, type of work, and employer. 

HB 5269 allows any employee to bring a violation to civil court and be awarded costs and penalties.

CBIA opposed HB 5269 throughout its legislative journey.

The bill leaves an exclusivity agreement unenforceable if an employee’s hourly wages are less than three times the minimum wage, or five times the minimum wage for independent contractors.

HB 5269 allows any employee to bring a violation to civil court and be awarded costs and penalties, as well as allowing the Attorney General to bring suits to civil court or assurance of the discontinuance of any alleged practices. 

Federal Ban

While the bill died in the Connecticut legislature, there is potential for federal legislation regarding noncompete agreements.

In January 2023, the Federal Trade Commission proposed a ban on noncompete agreements, which would make it illegal to enter into a noncompete or maintain a noncompete with an employee. 

The FTC proposal requires employers to rescind existing noncompete agreements and inform workers that they are no longer in effect.

While the bill died in the Connecticut legislature, there is potential for a federal ban.

The ban would apply to independent contractors or anyone who works for an employer, regardless whether they are paid or unpaid.

The FTC has been silent on the proposal in recent months; however, there are predictions that the ban could be passed this year. 

Other states have created their own bans on noncompete agreements, including California, Oklahoma, Minnesota, and North Dakota.

While these states have different variations of the ban, they all render noncompete agreements unenforceable under most circumstances.

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For more information, contact CBIA’s Ashley Zane (860.244.1169) | @AshleyZane9.