Are CT non-competes enforceable? What to know about state law

ERICA E. PHILLIPS / CT MIRROR Sen. Chris Murphy met with health care and legal industry leaders in New Britain on Tuesday, July 18, 2023 to discuss the impact of non-compete agreements.

Non-compete clauses, which can bar an employee from working for a competitor of their employer after leaving their job, have existed in many industries for decades.

But Connecticut doesn’t have a universal standard for enforcing the agreements, and though state lawmakers have considered more strict regulations on them in recent years, most proposals haven’t become law.

Here’s what to know about how the agreements are handled in Connecticut.

What is a non-compete agreement?

Non-competes typically apply to a specific geographic location or market and tend to remain in effect for a certain amount of time after employment ends.

The agreements were traditionally used for employees working with high-level, sensitive information but have since expanded to hairdressers, fast food workers, sandwich makers and other lower-paying industries. An estimated 36 million to 60 million Americans work under a non-compete, according to 2019 data from the Economic Policy Institute.

Proponents of non-competes say the clauses are designed to prevent employees from sharing trade secrets or bringing their clients to a competitor, while opponents argue that the agreements stifle wage growth by offering workers little to no leverage to negotiate or leave for a higher salary.

Are non-competes enforceable in Connecticut?

In Connecticut, a non-compete is only enforceable if it is reasonable — but there is no single definition of what “reasonable” means. Rather, a decades-old Connecticut law established a five-factor test that courts use to consider whether a non-compete meets that definition.

Those five factors are the length of time the agreement remains in effect, the geographic area it applies to, the fairness of the protection afforded to the employer, the extent of the restraint on the employee to work in their field, and the effect of the agreement on the public interest.

“In theory, the pieces are supposed to be disjunctive — which means that the parts are evaluated independently and if the noncompete is unreasonable on any one of the five factors, then the whole noncompete is unenforceable,” said Josh Goodbaum, partner at Garrison Law, a New Haven-based employment law firm. “But what’s ‘unreasonable’ is really in the eye of the beholder.”

Have there been any recent changes to non-compete laws in Connecticut?

Yes, but only for physicians, physicians assistants and advanced practice registered nurses. A wide-ranging 2023 health care law put limits on non-competes for those employees, making the agreements enforceable only within a period of one year and a geographic radius of 15 miles from the employee’s primary job site.

The legislature also considered a bill last year that would have limited non-compete agreements more broadly and banned them for employees who earn less than three times the minimum wage and independent contractors earning less than five times the minimum wage. But the House never voted on the bill.

A similar bill raised during this year’s legislative session passed out of the Labor and Public Employees Committee. This year’s bill has the same minimum wage parameters as last year’s and would require employers to give non-compete contracts to prospective employees earlier in the hiring process.

Have other states banned non-competes?

A handful of states, including California, Colorado and Minnesota, have fully banned non-compete clauses or rendered them unenforceable, while many others have passed laws restricting them.

The New York state legislature passed a ban on them last June, but Gov. Kathy Hochul, who wanted it to only apply to lower-wage workers, vetoed the bill several months later after the sides were unable to reach a compromise.

At the federal level, in January 2023 the Federal Trade Commission proposed a rule banning them with some exceptions, saying in a news release that they “hurt workers and harm competition.” A vote on the final rule is expected as early as this month.

In February 2023, U.S. Sen. Chris Murphy, D-Conn., reintroduced a measure placing limitations on the clauses, but it has yet to come up for a vote.