Noncompete agreements are beneficial for multiple reasons. These contracts can help entrepreneurs better ensure the protection of trade secrets. They can provide business leaders with a safety net when looking at the initial investment that comes with training new employees. When used wisely, these agreements are often beneficial for all involved. When abused, they can hurt the marketplace.
Some critics have voiced concern Connecticut’s laws regarding non-compete agreements are too lax. The fact that an estimated one in five workers nationally is currently covered by a non-compete agreement may support this contention. Due to such extensive use of these restrictive agreements, critics argue some unscrupulous business leaders are taking advantage of loopholes and unnecessarily requiring workers to sign extremely oppressive contracts. Unfortunately, the actions of these few business leaders could hurt the business interests of those who are using the agreements fairly.
Lawmakers Hear Critical Complaints
Some lawmakers agree with the critics. As a result, proposals are under consideration to increase the rules that govern non-compete agreements. At the state level, the Labor Committee recently passed a bill that would increase the rules around non-compete agreements. Most notably, the law would limit when business leaders can require such agreements from low-paid workers. The bill is currently under review by the House of Representatives.
Legislative moves to limit the powers of non-compete agreements are not uncommon. On the extreme end of the spectrum is a move to ban the agreements. California is a part of this movement and has chosen to make these agreements illegal. A bill under consideration at the national level within the Senate that would essentially prohibit the use of non-compete contracts throughout the country.
If either proposal under consideration becomes law, business leaders throughout the state may need to revisit their non-compete agreements and make changes as required. We will provide updates on the progression of this proposal as they become available.