🔒CT lawmakers consider strict limits for noncompete agreements

A proposal to sharply limit the use of noncompete agreements in Connecticut is drawing strong reactions from business groups and labor advocates. House Bill 5492 is one of 14 bills on the agenda for Thursday’s meeting of the legislature’s Labor and Public Employees Committee, which introduced the legislation. The bill is co-sponsored by Senate Majority Leader Martin Looney (D-New Haven) and Rep. Nick Gauthier (D-Waterford). Gauthier is a member of the committee. The bill would prohibit most noncompete agreements for lower-wage workers and impose strict conditions on their use for higher-paid employees. The measure would take effect Oct. 1 if approved. Under current state law, noncompete agreements are generally allowed if courts find them “reasonable” in scope, duration and geography. Judges can also modify overly broad agreements to make them enforceable. In contrast, HB 5492 would replace that flexible standard with a more rigid framework. It would render noncompete agreements automatically void for employees earning less than twice the state’s minimum wage — currently $16.94 per hour — and limit their duration to one year in most cases. It would also bar courts from revising invalid agreements. Supporters say the bill is needed to curb the growing use of noncompetes among lower-wage workers. In testimony submitted to a March 10 public hearing on the bill, Ed Hawthorne, president of the Connecticut AFL-CIO, said such agreements have expanded beyond high-level professionals into industries that include retail and hospitality, restricting workers’ ability to seek better-paying jobs. Hawthorne argued that noncompetes suppress wages and limit economic opportunity, calling them an unfair practice that “rigs the system” in favor of employers. He pointed to a now-blocked federal rule that sought to ban most noncompetes nationwide, saying state action is needed in its absence. Business groups, however, warn the proposal goes too far. Paul Amarone, senior policy director for job growth and manufacturing with the Connecticut Business & Industry Association, said the bill would effectively eliminate noncompetes for a large portion of the workforce, including mid-level employees who handle sensitive information and client relationships. Noncompetes play a key role in protecting trade secrets, investments in employee training and customer goodwill, Amarone said. He also criticized the bill’s wage thresholds as arbitrary and tied to a rising minimum wage, which he said could create ongoing compliance burdens for employers. In addition, he raised concerns about an increased risk of litigation, noting the bill would allow workers to sue and authorizes penalties for violations while removing courts’ ability to modify agreements. The proposal would also restrict “exclusivity agreements,” limiting when employers can prevent workers from taking second jobs. The bill was also a topic discussed during Connecticut Business Day on Wednesday. The event, hosted by CBIA at the Bushnell Center Performing Arts Center in Hartford, featured a panel discussion among legislative leaders. Senate Minority Leader Stephen Harding Jr. (R-Brookfield) said there are some fields for which noncompete agreements “make perfect sense.” “If you have a certain level of expertise and you’re making a large amount of money, particularly science-based, … it does make sense … why you’d have a contract in place that would not allow you to use that at a competing company,” Harding said. “But if you’re an entry-level employee at a retail-based or customer-based entity, I don’t see a reason why we should have certain noncompetes in place for those individuals.” Looney agreed. “The higher you go in terms of discretionary employment, knowledge or trade secrets, things of that nature, then noncompete agreements are justified,” he said. “But not for people who are in jobs that are virtually interchangeable from one employer to another.” The Labor Committee will vote Thursday on whether to issue a joint favorable report on that bill, as well as others that include Senate Bill 440, which would allow certain striking workers to be eligible for unemployment benefits, and SB 438, which would limit the use of self-checkout lanes at grocery stores. The Labor and Public Employees Committee is scheduled to begin its meeting at 9 a.m. Thursday in Room 1C of the Legislative Office Building in Hartford.