Labor and Public Employees Committee
JOINT FAVORABLE REPORT
Bill No.: SB-906
Title: AN ACT CONCERNING NON-COMPETE AGREEMENTS.
Vote Date: 3/23/2021
Vote Action: Joint Favorable Substitute
PH Date: 3/4/2021
File No.:
Disclaimer: The following JOINT FAVORABLE Report is prepared for the benefit of the
members of the General Assembly, solely for purposes of information, summarization and
explanation and does not represent the intent of the General Assembly or either chamber
thereof for any purpose.
SPONSORS OF BILL:
Labor and Public Employees Committee
REASONS FOR BILL:
Many workers, including many low-wage and people of color, are required to sign non-
compete agreements before being hired.
RESPONSE FROM ADMINISTRATION/AGENCY:
PATRICK HULIN, GOVERNOR NED LAMONT'S ASSOCIATE POLICY DIRECTOR,
STATE OF CONNECTICUT
The proliferation of noncompete agreements is harming CT's workers and the economy.
Placing limits on these agreements will make a real difference for workers who are bound by
them, especially low-wage workers who are disproportionately women and people of color.
They inhibit economic opportunity for workers and harm the ability of businesses to innovate.
They depress wages for far too many workers. A shocking number of workers, even low-
wage workers, are subject to these agreements regardless of their job duties or availability to
access confidential information. The bill allows workers greater freedom to change jobs and
thereby gain greater bargaining power and higher wages. This is a policy that will make a
real difference in workers' lives and the economic competitiveness of the State.
WILLIAM TONG, ATTORNEY GENERAL, STATE OF CONNECTICUT
This is a smart, streamlined bill that will protect workers and strengthen our economy. It will
give guidance to both employers and workers, and include straightforward, commonsense
mechanisms to incentivize compliance. Our economy is still recovering from the effects of the
COVID pandemic and too many workers are still unemployed or underemployed. This
legislation can help us respond by maximizing worker flexibility, mobility, competition and
entrepreneurship so we can get more people back into the labor force. Overuse of these
provisions restrict workers liberty, limiting their ability to choose the right job and even start
their own businesses. Non-compete provisions are bad for workers, businesses and for the
State. Most non-competes do not work and are harmful to workers, to the free market and
economy. The bill is specific. It provides that the Attorney General can bring a suit on behalf
of workers who have been harmed by non-competes. It creates meaningful penalties that
disincentivize indiscriminate use of non-competes in employment contracts. It is carefully
crafted legislation that protects workers and promotes a strong economy by removing barriers
to a free market for labor. He urges support.
CHRISTOPHER S. MURPHY, US SENATOR
The American workforce has experienced significantly reduced job mobility, tepid wage
growth, and declining rate of entrepreneurship in recent decades. At the same time, non-
compete clauses have become more prevalent. These inherently influence competitive labor
market forces by narrowing the available employment options. They also impede
entrepreneurship since firms who use them are more likely to fail. The desire to limit the use
of these clauses is bipartisan in the US Senate. Banning the use of non-competes would
allow workers to get better jobs, boost wages, increase entrepreneurship and spur
innovation.
KURT WESTBY, COMMISSIONER, DEPARTMENT OF LABOR
They requested consideration of this bill to protect certain employees and independent
contractors from onerous and unfair non-compete agreements imposed by an employer as a
condition of employment. Concern about the overuse of non-completes has grown in recent
years. Many states already prohibit non-compete agreements entirely since they restrict
worker mobility, discourage entrepreneurship and make it harder for new businesses to
attract talent. This bill recognizes the necessity of protecting legitimate business interest,
such as proprietary information. It incentivizes the use of less restrictive means including
nondisclosure and non-solicitation agreements. Setting limits on these clauses offers a
middle ground that protects workers' rights without sacrificing business interests.
NATURE AND SOURCES OF SUPPORT:
LEWIS CHIMES, ATTORNEY
His testimony noted there is a bill adopted that places restrictions on non-competition
agreements for physicians and they see no reason carpenters, veterinarians, automobile
salesmen and restaurant workers should not be treated any differently than doctors.
COVD-19 has created many individuals who have lost their jobs/livelihood through no fault of
their own and are prohibited from finding comparable work in their chosen field. This bill has
a one-year limitation on covenants not to compete. These covenants would not be imposed
on low income workers or be enforceable if the employer discharges the employee or the
employee leaves for good cause attributable to the employer. Employees are given a ten-
day grace period to sign a covenant not to compete and are to be advised that they have the
right to consult with counsel prior to signing. It doesn't affect employers' interests in
protecting their existing customers, confidential information and trade secrets. This is a
reasonable balance between the need of businesses to protect their legitimate interests and
the compelling economic public policy of allowing workers, particularly low-income workers,
free and unfettered access to our labor market.
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HANNA HALLORAN, CT WOMEN'S EDUCATION AND LEGAL FUND
Non-compete agreements disproportionately affect low-wage workers, the majority being
women and people of color. Low wage workers not provided with sufficient numbers of hours
or shifts may need to seek additional employment at a company in the same industry. If they
signed a non-compete agreement, they may be unable to earn the wages necessary to meet
their family's basic needs. CT should prioritize retaining skilled workers by passing this bill
and barring the use of these agreements, which restrict job mobility and reduce worker's
wages. COVID-19 has limited opportunities workers have by decreasing shifts available.
These agreements make it impossible to work multiple jobs. No-poaching agreements not
only prevent individuals from moving to better jobs, but they also contribute to larger negative
trends in the economy that are reducing economic dynamism and driving wage stagnation
across the economy.
NAJAH FARLEY, NATIONAL EMPLOYMENT LAW PROJECT
She first learned of this issue while an Assistant Attorney General of New Your where
multiple uses of these agreements were uncovered involving many industries including
phlebotomists, IT professionals, security guards, bike messengers, school cafeteria workers
among others. She has seen first-hand the deleterious effect these agreements can have on
workers. Some of these agreements are bound by industry or geography, but some are very
broad and implicate entire regions of the United States. These agreements are usually
presented by employers in a "take it or leave it" fashion and workers don't have the power to
change or negotiate their implementation. This bill would mitigate the coercive nature of
these agreements by making them unlawful based on a wage threshold and by outlining key
provisions. These agreements often lead to power differentials that allow employers to
enforce the agreements through "soft" measures, such as threats, sending a cease and
desist letter, placing the burden of proof on the party attempting to enforce the agreement.
This will serve to change the balance of power to make it easier for workers to challenge the
position of on-competes. This bill allows employees to challenge the waivers and ensure they
are nullified before moving on without a risk of being fired.
SUE GARTEN, ATTORNEY, GREATER HARTFORD LEGAL AID, INC.
In recent years, employers have required low wage workers, including fast-food workers,
commercial cleaners and home health aides, to sign covenants not to compete. These
include workers whose average wage per hour is less than $13. These workers do not have
specialized technical skills and are not privy to trade secrets held by higher paid employees.
Even a one-year restriction in the same type of work in a 1015 mile area adversely impacts
employment opportunities. They offer suggestions they believe would improve the proposed
bill. It would be inequitable to allow a non-compete agreement to be enforced against a
worker who was unfairly terminated or who left a job because of intolerable or unlawful
working conditions. Current laws are not enforceable for physicians, and other workers
should receive this same protection. Section 2 of the bill should read:
"Even if otherwise valid under this section a covenant not to compete shall not be enforceable
if (i) the employment or contractual relationship is terminated by the employer or contractor
without good cause or (ii) the employment or contractual relationship is terminated by the
worker for good cause attributable to the employer or contractor". The definition of a "non-
solicitation agreement" should have parameters similar to those defining the non-compete
provisions. They suggest it reads:
"Such agreement shall not: 1) restrict the worker's activity for more than one year or 2) be
more restrictive than necessary to protect such business in terms of the agreement's
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duration, geographic scope, type of work or employer". They would like the proviso "no
employer or contractor who uses on-call shift scheduling as a regular business practice may
require its workers to sign or agree to an exclusivity agreement".
TERRI GERSTEIN, DIRECTOR, STATE AND LOCAL ENFORCEMENT PROJECT,
HARVARD LABOR AND WORKLIFE PROGRAM, SENIOR FELLOW, ECONOMIC POLICY
INSTITUTE
Economists have documented employees' extensive use of non-competes, even where
they're unenforceable, the lack of bargaining that typically precedes employee signing, and
non-competes' adverse impact on job mobility and wages. Many harmful effects are less
readily calculable. Many workers continue to experience workplace violations, like
discrimination, harassment, or wage theft, because a non-compete makes them fear they'll
be sued if they leave and get a new job. This can have a profound impact on a worker's life.
Many people are minimum wage workers and live paycheck-to-paycheck and do not have
strong bargaining power. There should be a high bar for letting companies prevent working
people from earning a livelihood in their field. There are tweaks that could be considered. It
would be helpful if the bill more squarely applied to non-competes existence as of July 1,
2021 or such other date after which such legacy non-competes would automatically lapse if
not renewed.
JOSHUA R. GOODBAUM, PARTNER, GARRISON, LEVIN-EPSTEIN, FITZGERALD &
PIRROTTI, P.C.
The theoretical underpinnings of the 'at will' doctrine is that if employees are able to leave
their jobs without reason or warning, then employers likewise should be free to terminate their
employees without notice or cause. The growing prevalence of covenants not to compete
undermines this trade-off. Employees with non-competes can leave their jobs only in theory;
in practice they have no choice but to stay. This reduces employee bargaining power and
contributes to reduced job mobility and stagnant wage growth. They suggest amending SB
906 to incorporate subsection of HB 6379 which prohibits employers from enforcing non-
competes against employees who have been laid off. An employee facing a layoff through
no fault of their own should be able to accept any job offer they can get. They also suggest
the bill be made retroactive.
SAL LUCIANO, PRESIDENT, CT AFL-CIO
These agreements were traditionally more common in professional or managerial jobs with
higher rates of pay and greater levels of responsibility, but today they are becoming common
in the entry-level and low-wage jobs, even in the service, restaurant and hospitality industries.
This is another way of rigging the system by eliminating a worker's right to move to a better
paying position. They artificially suppress wages, which in turn, reduces overall economic
growth. They are concerned that the wage levels are still too low to protect professional
employees who have no managerial responsibilities. They are encouraged that the Attorney
General will have authority to enforce these protections.
CARLOS MORENO, STATE DIRECTOR, CT WORKING FAMILIES ORGANIZATION
Non-competes weaken the ability for workers to earn a living, advance their careers and
develop more skills and mastery in their chosen professions. They weaken wage growth
because changing jobs is how workers often get a raise. They contribute to the decline in
entrepreneurism in the labor market. This is a good start, but it should also be prohibited
among middle income workers without managerial responsibilities. They are a drag on
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economic growth. This is an example of exploitation of labor. This practice should be banned
altogether.
MARK LEMLEY, PROFESSOR,
WILLIAM H. NEUKOM, PROFESSOR, SANFORD LAW SCHOOL,
DURIE TANGRI, LLP,
ORLY LOBEL, WARREN DISTINGUISHED PROFESSOR OF LAW, UNIVERSITY OF SAN
DIEGO
In the past decade, a wealth of research empirical, experimental and theoretical studies-
offer evidence about the key role that human capital policy, including noncompete contracts,
plays in industries and regions. Non-competes favor large incumbent firms. Markets become
more concentrated when the clauses are adopted and enforced. These agreements also
decrease wages. Employers set compensation largely based on competing external offers.
When these offers are reduced, employers face less pressure to increase wages.
Restrictions on job mobility have a disproportionate negative effect on certain demographics.
The modern economy depends on employee mobility. The workforce needs to be able to
respond to sudden disruptions, such as COVID-19, which radically shifted the demand for
workers.
SANDEEP VAHEESAN, LEGAL DIRECTOR, OPEN MARKET INSTITUTE
While they believe a full ban on non-compete clauses should be enacted, this is a step in the
right direction. Making these clauses illegal, and backing this up with effective legal
sanctions, is essential for deterring employers from using these contracts and also protecting
workers' freedoms to switch jobs or start their own businesses. Research has found that
these agreements discourage workers from leaving, even when employers can't legally
enforce them in court. The existence of these contracts harms workers. The conventional
employer justification ignores the availability of more effective and less restrictive alternatives.
Copyright and trade secret laws can be used to protect business information. Non-competes
are a deeply-flawed tool for protecting employer information. Using them to protect company
know-how, no matter how discrete or trivial, does not guard against overt or covert disclosure
information to rivals.
KARLA WALTER, SENIOR DIRECTOR, AMERICAN WORKER PROJECT, CENTER FOR
AMERICAN PROGRESS ACTION FUND
She has conducted extensive research and developed recommendations on how state
oversight of non-compete agreements can boost worker pay and freedom. While
corporations have long required CEOs and top talent to sign such agreements, today more
than 38% of workers across all educational levels and 35% of those without college degrees
report signing a noncompete agreement at some point in their lives. Failure to address this
problem now will exacerbate the effects of the economic downturn on workers. Wage growth
barely outpaced inflation even before the COVID-19 pandemic began. Allowing workers to
move easily between firms can stimulate the economy by fostering innovation through
information-sharing. As workers leave, they can start new companies and promote regional
industry development since firms can co-locate to share local talent. This bill would establish
CT as a national leader. It will boost worker pay and job mobility at a time it is desperately
needed and jump-start economic growth by supporting local entrepreneurs.
Page 5 of 8 SB-906
NATURE AND SOURCES OF OPPOSITION:
MELISSA COCUZZA, FOUNDER, A BALANCED LIFE HEALTH EXPOS
It this bill passes, it could potentially harm her business beyond repair. She said this bill was
originally aimed at the home health care agencies where she worked in an administrative
staff position. She said this industry should address their own concerns through private legal
avenues since this bill would adversely affect many other industries as well. She has been
developing her business for 25 years. An employee can leave and can start a model of the
business she has created. With non-compete protection in place, they would have to get
other employment for 2 years and hopefully, by then would lose interest in competing with her
company. Should this bill be passed, she may be forced to relocate, and since she can run
her business from any state and hire independent contractors from other states it would
mean less money to CT.
CT HOSPITAL ASSOCIATION
They urge the general statutes now in place stay intact. Throughout this pandemic and since
2020, hospitals and health systems have continued to provide high-quality care for everyone
regardless of ability to pay. The provision of this bill specifically exempts, among others,
covenants not to compete that are already established. The outcome is a statute that
attempts to achieve a balance between the legitimate interests of both the employer and
physician. To preserve the balance previously achieved, they ask that a section be amended
to include an exemption for covenants not to compete already established by adding the
following: This section shall not apply to any covenant not to compete as defined in section
20-14p of the General Statutes.
DEBORAH McKENNA, VICE-PRESIDENT, CT EMPLOYMENT LAWYERS ASSO