Currently, the Connecticut state legislature is considering HB 6594, which would prohibit the use of most non-compete agreements. If passed, Connecticut would become the fourth state to enact such a ban. The bill was passed by the Labor and Public Employees Committee on February 16th, and could be given a floor vote later this session.
HB 6594 prohibits non-compete agreements for all workers earning under three times the minimum wage, or independent contractors earning under five times the minimum wage. Above that threshold, agreements must be provided to workers in advance, must generally be limited to one year at most, and must abide by several restrictions on their temporal and geographic scope. If a non-compete is added to an existing employment agreement, it must be supported by a raise or other consideration sufficient to indicate that the worker was able to bargain for benefits in return for the addition of the non-compete. The restrictions would be enforced by the Attorney General.
Existing provisions governing non-competes for physicians, physical therapists, and broadcast employees are not modified by HB 6594. The bill affects only non-compete agreements and does not change the rules around non-solicitation agreements like those at issue in the home health industry; that conversation can remain separate from the one around this bill.
The bill contains the following provisions:
- Limiting non-competes to a reasonable scope
- Restricting non-competes to higher-income workers
- Providing employees with notice: Too often, employees are forced to sign non-competes on their first day of work, with no meaningful opportunity to review the covenants, let alone negotiate about their scope.
- Clarifying that Connecticut employees can litigate their non-competes in Connecticut courts under Connecticut law
It further invalidates all non-compete agreements on July 1, 2023, if any of the following apply:
- The employee is a non-exempt (hourly) employee,
- The employee is an exempt employee (salaried) who earns less than three times the minimum wage ($93,600 per year for a full-time employee at $15 an hour), or
- The independent contractor earns less than five times the minimum wage ($75 per hour at $15 hour)
Big I CT is concerned about this bill, as it will impact the independent insurance agencies and brokerages that operate across the State of Connecticut. While many employees within an agency or brokerage that are currently requested to sign non-compete agreements are likely above the compensation threshold amount, other workers within an agency or brokerage who are currently required to sign non-compete agreements will fall below the compensation benchmarks and, therefore, would not be subject to a non-compete agreement. This change in the law will most likely have the biggest impact on the smaller Connecticut insurance agencies and brokerages.
If HB 6594 is passed in its current form, we do not believe it will affect the ability of a buyer of an insurance agency or brokerage from having the seller sign-off on a non-compete agreement of up to five years, in the geographical area where the seller sold its insurance policies before it sold its agency to the buyer. Additionally, the new statute should not have on any effect on a tightly drawn non-solicitation agreement, or clause, that applies to customers or former prospective customers of the former employee or former independent producer.
Big I CT opposes HB 6594 due to the harmful impacts on the state's independent agencies. Furthermore, the Federal Trade Commission is currently pursuing a national ban on non-competes, and the state should not rush to adopt a state law while the federal government is developing a nationwide regulation.
Contact Scott Hobson with questions.