Employment agreements often include clauses designed to protect a company’s intellectual property, proprietary interests and commercial contacts. One such restrictive covenant is a noncompete clause, which limits a former employee’s ability to work in similar roles or industries within specified geographical for specified time periods. Connecticut law has generally found these covenants to be enforceable as long as they are reasonable in scope.

In 2023, the Federal Trade Commission (FTC) introduced a rule that aimed to ban noncompete clauses in employment agreements, finding them to be an unwarranted restraint of worker mobility and competition. The rule was to take effect in September 2024. But in August, a federal judge struck down the rule, holding that the FTC lacks substantive rulemaking authority to decide issues of unfair competition that have usually fallen under state jurisdiction. The court ruling put enforcement of the FTC noncompete ban on hold pending appeal. 

State laws on restrictive covenants continue to apply. In Connecticut, noncompete agreements are legal but must meet certain conditions. The courts apply a balancing test that weighs the interests of the employer against those of the employee and the public. The following factors are considered in deciding on enforceability:

1. Duration — The length of time that the noncompete restricts the employee’s ability to work in the industry must be reasonable. Courts generally find time limits of up to two years, while excessively long restrictions are subject to scrutiny.

2. Geographical limits — Connecticut courts will approve noncompete agreements that only apply to areas where the employer has an active presence. A restriction that extends to areas where the employer does not conduct business will likely be deemed unreasonable. 

3. Protection of legitimate business interests — The employer must demonstrate that the noncompete is necessary to protect trade secrets, confidential information, client relationships or other vital data. 

4. Impact on the employee — The restriction may not limit the employee’s ability to work in their chosen field or in a closely related one.

5. Public interest — If the restriction harms the public, such as by reducing competition or limiting the availability of services in an area, it will likely be unenforceable.

While the future of noncompete agreements is in flux at the federal level, businesses in Connecticut must carefully draft their restrictive covenants to comply with state law. This also applies to nonsolicitation agreements and nondisclosure agreements, which are not affected by the FTC rule. An experienced Connecticut employment law attorney can make sure that your company’s agreements are reasonable and serve to protect legitimate business interests.

Gesmonde, Pietrosimone & Sgrignari, L.L.C. represents employees in the full range of Connecticut employment law matters. To set up a meeting with one our attorneys in East Haven or Hamden, please call 203-745-0942 or contact us online.