Bill Weakening Noncompete Agreements Bad for Business

While much of the focus of the General Assembly’s labor agenda has been on paid FMLA and increasing the minimum wage, another bill with significant impact on many Connecticut businesses has slowly moved through the legislative process.

HB 6913 places considerable new restrictions on employers’ use of noncompete agreements.

Certain industries use the agreements to provide limited, temporary protection of the legitimate business interests of employers, including their customer base, confidential information, and trade secrets.

These agreements are heavily restricted by the courts in terms of scope, time, geographic, and industry type in an effort to balance the need to protect employers’ interests while also preventing employers from eliminating any future competition from former employees.

However, HB 6913 upends this court-provided balance by placing new restrictions on these agreements. If enacted, noncompete agreements would become invalid if:

• The agreement is applied to anyone making less than twice the minimum wage
• The business and its goodwill is sold to another owner
• The employee is terminated by the employer  
• The employee resigns for good cause attributable to the employer

Adverse Impact

These new restrictions will have an adverse impact on a wide range of industries using these agreements.

For example, if these agreements are not applied to individuals making less than twice the minimum wage, many home care workers employed by home care agencies that provide patients will be able to quit and immediately poach the patients they would not have met if not for the agency.

A startup business trying to sell its technology to a larger company could not ensure that the buyer would not face the threat of employees leaving the startup and immediately developing a competitive product.

Perhaps more important is the message such new restrictions send to businesses considering Connecticut as a place to grow or expand.

Or, even worse, an employee subject to a noncompete agreement could claim they were leaving a company for cause attributable to the employer, a determination only a court could make many months after an employee had already shared proprietary or confidential information with a competitor.

Perhaps more important is the message such new restrictions send to businesses considering Connecticut as a place to grow or expand.

If there are no reasonable means to protect your legitimate business interests, why would you choose Connecticut as a place to invest your money to hiring and training employees?

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For more information, contact CBIA’s Eric Gjede (860.480.1784) | @egjede