Changes at the national and state level could soon render non-competes a thing of the past or at the very least alter the permissible contours of such agreements.
The Federal Trade Commission, following a preliminary finding that non-competes constitute an unfair method of competition in violation of Section 5 of the Federal Trade Commission Act, has proposed a new rule that would ban employers from enforcing such agreements. The agency believes that banning the practice of non-competes would increase wages in the United States by $300 billion a year in addition to expanding career opportunities, arguing that non-competes have been responsible for suppressing wages, hampering innovation, and preventing new business. The FTC is currently soliciting public comments on the proposed rule through March 20, 2023.
Meanwhile, in Hartford, legislators are considering HB 6594, An Act Concerning Non-compete Agreements, that would set state mandated requirements for non-competes and other exclusivity agreements. While this bill would not eliminate non-competes in Connecticut, it would drastically change the requirements relating to any agreement entered into after July 1, 2023, making any such agreement unenforceable unless it meets stringent state-mandated requirements, including:
- A limited duration of one year following termination of employment (unless additional requirements are met, in which case it can be extended to a maximum of two years);
- Inclusion of a statement of the worker’s rights;
- That it be executed separately form the employment contract;
- That it be necessary to protect a legitimate business interest such as a trade secret or confidential information and even then, that it be no more restrictive than necessary to protect that interest; and
- A requirement that, where the non-compete is entered into after employment has begun, it has to be accompanied by additional consideration.
Even if both the FTC rulemaking and the Connecticut legislation under consideration fail to gain traction this year, similar moves across the country make it likely that non-competes as we have known them are not likely to be around much longer.
Connecticut Legislation Worth Watching
The 2023 Connecticut Regular Legislative Session kicked off on January 4, 2023 and runs through June 7. Here are some bills worth watching if you are a Connecticut Manufacturer:
SB114/SB117 Acts Concerning Career Training Programs – Acts intended develop programs and provide information on trade schools targeted at middle and high schools, including establishing a task force to examine transportation barriers related to work-based learning programs;
HB5672/HB6584 An Act Establishing A Research and Development Expenses Tax Credit For Pass-through Entities
HB6585 An Act Concerning A Study to Promote Workforce Development – an act intended to establish a working group to conduct a study and make recommendations regarding the feasibility of leveraging the H1-B visa cap exemption process to fill high-value job openings and promote workforce development using the Global Entrepreneur in Residence program as a model.
SB154, An Act Requiring A Performance Audit of Certain Workforce Development Programs – aimed at measuring the effectiveness of current workforce development programs in meeting the state’s workforce needs
SB241 An Act Establishing A Buy Connecticut Program for Defense Contractors – aimed at creating incentives for defense contractors to utilize the services of in-state subcontractors and businesses.
Employment Bills Pending
SB 21: Act Prohibiting Employers From Charging Employees For Training Costs Upon Separation From Employment. Prevents employers from charging training costs to employees upon an employee leaving employment.
SB 91: Act Expanding Workers’ Compensation Coverage For Post-traumatic Stress Injuries For All Employees. Extends workers’ compensation coverage for post-traumatic stress injuries to all employees. Another bill, SB 491, would allow workers’ compensation coverage to all workers for mental or emotional injuries.
SB 93: Act Concerning Compensation for Certain Employees Whose Scheduled Shift Has Been Reduced Or Cancelled. Requires employers with at least 500 employees within the US or globally to pay retail and hospitality employees half of their regular rate of pay for any scheduled hours that are cancelled after the employee reports to work or with less than 7 days advance notice.
SB 228: Act Concerning Employees Loss Of Healthcare Coverage As A Result Of A Labor Dispute. Allows employees to obtain health insurance coverage through the Connecticut Health Insurance Exchange should they lose coverage due to a labor dispute.
SB 229: Act Concerning Unemployment For Striking Workers. Allows employees participating in a labor dispute to collect unemployment benefits.
SB 486: Act Concerning State Employees And The Paid Family And Medical Leave Act. Requires state employees to participate in the Paid Family and Medical Leave Program.
SB 489: Act Limiting The Days An Employer Can Mandate An Employee To Work. Prohibits an employer from mandating an employee to work more than six consecutive days without a day off during such six-day period.
SB 825: Act Concerning Temporary Workers And Paid Sick Leave. Requires temporary employment agencies to provide temporary workers with annual paid sick leave.
HB 5243: Act Concerning The Disclosure of Salary Ranges In Job Postings. Requires employers to disclose salary ranges in all job postings.
HB 5858: Act Establishing A Flexible Spending Account Program For Child Care Expenses. Requires the Labor Commissioner to establish a state-administered flexible spending account program for expenses incurred for child care.
HB 6129: Act Allowing Individuals To Opt Out Of The Paid Family and Medical Leave Program. Allows individuals to choose whether to participate in the paid Family and Medical Leave program.
HB 6275: Act Concerning Use Of An Employee’s Personal Vehicle For Employment Purposes. Requires employees be reimbursed when they are required to use their personal vehicle to carry out job duties.
HB 6278: Act Expanding The Paid Family And Medical Leave Program. Provides additional options to a worker under the Paid Family and Medical Leave program, such as the ability to work remotely.
HB 6363: Act Concerning Paid Sick Time And Mental Health. Requires employers to provide two mental health days per calendar year to eligible employees.
HB 6365: Act Concerning Undocumented Workers And Unemployment Benefits. Allows undocumented individuals to be eligible for unemployment benefits.
Governor’s Bill, HB 6668: An Act Modernizing The Paid Sick Days Statutes. Requires all employers with 11 or more employees to provide 40 hours of paid sick leave, and employers with 10 or fewer employers to provide 40 hours of unpaid job-protected sick leave. Also increases the rate by which sick leave is accumulated and can be used by employees.
If these, or any other currently pending bills, are of interest to you now is the time to contact your local legislators to voice your opinions.
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Carmody works with clients across the supply chain in an extensive range of industries from concept and design stages, through to manufacturing, and onto sales and customer support to develop a tailored and proactive approach for the needs of each client. Carmody’s Manufacturing Group has decades of combined experience representing and defending manufacturers and distributors of all sizes, from national and multi-national corporations to local niche manufacturing operations.
This information is for educational purposes only to provide general information and a general understanding of the law. It does not constitute legal advice and does not establish any attorney-client relationship.