Part of a recent executive order requests the Federal Trade Commission to limit or ban non-compete agreements for employees. The basis for the request is that non-competition agreements drive down employee wages by making it more difficult for employees to pursue higher-paying jobs. However, many businesses believe non-compete agreements are necessary for protecting investments and trade secrets.
How might this executive order impact Connecticut workers?
Current state regulations
In the past, states have regulated non-compete agreements. California, Oklahoma and North Dakota have outright bans on non-compete agreements and several other states restrict their use with low-wage workers. Connecticut does not have a statute or regulation that restricts non-compete agreements. Instead, case law governors most non-compete agreements.
Except for the security and broadcast industries, which have industry-specific statutes, judges consider several aspects of case law when deciding if a non-compete agreement is reasonable:
- Length of the restriction
- Fairness of the protection provided to the employer
- How much it interferes with the employee’s ability to find new work
- Whether it goes against the public interest
How the executive order might change regulations
The head of the FTC favors federal rules that target anti-competitive practices. Federal regulations could supersede any existing state laws. However, businesses are likely to challenge any restrictions imposed at the federal level. Because of these expected challenges, many believe the FTC may opt for a conservative approach, rather than a total ban.
While federal regulations could change the way Connecticut enforces some non-compete agreements, employees who believe they are unfairly burdened by a non-compete agreement have legal options under current Connecticut law.