Connecticut Legislature Restricts the Use of Non-Compete Agreements: Late last month the Connecticut General Assembly passed “An Act Concerning Employer Use of Noncompete Agreements” (the “Act”).
Effective October 1, 2013, the Act will dramatically alter how employers approach mergers and acquisitions. Specifically, under this new law: If, after a merger or an acquisition, an employee is being hired by, or continuing his or her employment with, the surviving entity, and the surviving entity intends to bind the employee to non-competition restrictions, then the employer must provide the employee with a written copy of the non-compete agreement and at least seven (7) days to consider signing the agreement.
While inconvenient for employers, the Act, on its face, isn’t particularly alarming. However, the practical implications are considerable. For example, as a result of this new law, employers may be forced to inadvertently give employees advance notice of possible business transactions, such as closings or consolidations. Ultimately, notice of plant closings resulting from mergers or acquisitions will be dictated by legislative fiat—not business necessity or the unique culture of each organization.
Furthermore, employers must also now consider the possibility that an existing employee might balk at signing a new non-compete agreement, thereby complicating—and perhaps even jeopardizing—a merger or acquisition.
Bottom Line for Employers: Effectively navigating a business merger or acquisition has never been easy. And with passage of the new Act, life for Connecticut’s employers just became a bit more complicated. For assistance in adhering to this new law, contact Bud O’Donnell.