Businesses commonly use non-compete agreements for a variety of reasons including keeping high-performing employees, preserving valuable customers and protecting private information. A valid non-compete can also send a strong signal to competitors regarding the aggressive recruitment of key staff. However, a non-compete agreement cannot aid the goals of a business if it's not enforceable. In Connecticut, there are five factors the court will review in its analysis of the non-compete but the validity of the agreement will mostly fall on two factors: restrictions of time and geography.
The most important question when creating a non-compete agreement is whether the agreement will pass judicial review and be enforceable. The agreement must not only protect the activities of the company, it must also acknowledge the employee's ability to earn a living. Therefore a guideline when creating a non-compete is whether the agreement is reasonable and fair to both the employer and employee. In Connecticut, the courts use a five factor test to assess whether a non-compete is reasonable and fair to the employer and employee.
To determine the validity of a non-compete agreement, a court in Connecticut will review:
- Whether the length of time of the restriction is reasonable
- Whether the geographic area covered by the restriction is reasonable
- The ability of the employee to pursue his or her occupation if the agreement is enforced
- The fairness of protection given to the employer
- The public interest
The two most important factors are the time restriction and the scope of the geographic restriction of the agreement. If both the time and geographic restrictions are found reasonable, then the non-compete will generally be upheld, but if one of the two factors is found unreasonable then the agreement will likely be found invalid.
In Connecticut, the courts are generally willing to accept a one year time restriction, but longer time restrictions may be enforced. However, the longer the time restriction the less likely the restriction will be found reasonable. In Connecticut, the geographic scope of a non-compete agreement is even more salient because of Connecticut's small geographic size and is the basis on which most non-competes are found unreasonable.
In general, a non-compete may be valid when the employee is only restricted from working in places where the business is currently engaged or is likely to conduct business. Some agreements specify certain cities or towns and other non-competes specify a radius of restriction. However, the history of court rulings on the issue in Connecticut shows that courts are more willing to uphold restrictions with smaller distances. Connecticut courts have commonly invalidated restrictions with anything more than a 35-mile radius. This is true even when an employer has demonstrated a presence in a region or nationally because the ability of an employee to earn a living will likely outweigh the employer's concern. Moreover, courts will not blue line or rewrite the agreement to make it reasonable. Therefore, employers should follow the general rule of specificity is best.
While all non-compete agreements are not struck down, employers should be aware of potential overreach in non-compete agreements by working with an attorney who can draft the agreement to the business's particular circumstance.