The FTC Non-Compete Rule, Connecticut Enforcement, and What Employers Should Actually Do Now

The Federal Trade Commission's final rule banning most non-compete agreements, 16 C.F.R. § 910, was scheduled to take effect September 4, 2024. On August 20, 2024, the Northern District of Texas in Ryan LLC v. FTC issued a nationwide injunction blocking enforcement of the rule, holding that the FTC lacked statutory authority to issue it. The decision is being appealed to the Fifth Circuit, and the Eastern District of Pennsylvania reached a different conclusion in ATS Tree Services, LLC v. FTC, producing a circuit-level conflict that may eventually reach the Supreme Court.

For Connecticut employers trying to plan around non-compete enforceability, the federal picture is uncertain for at least the next twelve to eighteen months. That is not an excuse to do nothing. The Connecticut state-law picture has shifted meaningfully in the last two years, and the practical compliance question for most employers is shaped more by state law than by the federal rule's fate.

Connecticut's current framework

Connecticut has historically allowed non-compete agreements subject to a reasonableness standard applied by the courts — durationally, geographically, and in scope. The 2016 amendment codified specific reasonableness factors for physician non-competes under Conn. Gen. Stat. § 20-14p, and the 2021 amendment covered home health workers under § 31-50a. These statutes remain in effect.

The 2023 amendment — Public Act 23-97, codified in part at Conn. Gen. Stat. § 31-50b — expanded statutory restrictions to a broader class of employees. The key provisions:

• Wage threshold. Non-compete agreements are not enforceable against employees earning less than three times the federal minimum wage, which at current levels works out to roughly $45,000 per year.
• Advance notice. Non-compete agreements must be provided to the employee in writing at least ten business days before they are to take effect.
• Consideration. For current employees, there must be consideration beyond continued employment.
• Geographic and durational limits. The statute does not set specific limits but codifies that unreasonable limits are unenforceable and reiterates the judicial reasonableness standard.

This framework does not go as far as the FTC rule would have gone — the FTC rule would have banned essentially all non-competes for non-senior-executive employees — but it is meaningfully more protective of employees than Connecticut's pre-2023 law.

The enforcement environment

The Connecticut Attorney General's office has enforcement authority under the 2023 amendment, and has publicly stated that it will pursue actions where non-compete agreements are facially non-compliant. That has not translated into a large volume of enforcement actions as of mid-2024, but the threat is credible.

Private litigation over non-compete enforceability has always been the primary enforcement channel, and the 2023 amendment has sharpened the arguments available to employees challenging non-competes. In recent Superior Court decisions I have reviewed, judges are applying the wage threshold and advance-notice requirements strictly — a non-compete that does not meet the statutory prerequisites is being found unenforceable on summary judgment, without reaching the reasonableness analysis.

What employers should actually do now

Three practical recommendations for Connecticut employers with existing or contemplated non-compete programs.

One: audit existing agreements against the 2023 statute. Any non-compete agreement executed before July 2023 should be reviewed against the current statutory framework. Agreements that do not meet the wage threshold are not enforceable as to employees below that threshold; agreements that lack advance notice or adequate consideration may be unenforceable in whole or in part. The audit should identify which agreements are problematic, which are borderline, and which are fully compliant.

Two: consider whether non-competes are actually the right tool. The policy rationale for non-compete agreements has always been protection of legitimate employer interests — customer relationships, confidential information, trade secrets. In many cases, those interests are better protected by non-solicitation agreements, confidentiality agreements, and trade-secret protections that do not trigger the non-compete statutory framework. For most Connecticut employers, the volume of non-compete agreements can be reduced significantly without loss of the underlying protection, by shifting to narrower, purpose-specific restrictive covenants.

Three: prepare for the FTC rule to return in some form. The Ryan injunction is not the end of the federal non-compete discussion. Whether the rule is restored in a modified form, replaced by congressional legislation, or addressed by state-level action elsewhere, the direction of travel over the next five years is toward greater restriction on non-compete enforceability. Employers who build their retention and IP-protection strategies around enforceable non-competes are building on ground that is likely to continue shifting. The planning assumption should be that non-compete enforceability will be progressively more limited, not that the current uncertainty will resolve in employers' favor.

On senior executives

One important exception in the 2023 amendment, and in the FTC rule as drafted, is the treatment of senior executives. The Connecticut statute does not exempt senior executives from its wage threshold, but as a practical matter senior-executive non-competes easily exceed the threshold. The FTC rule would have grandfathered existing non-competes for senior executives (defined by a policy-making function and $151,164+ compensation threshold). For C-suite and senior VP-level retention and departure planning, non-compete agreements remain a workable tool in Connecticut, provided they are drafted to the current statutory standard and reasonable in scope.

A final thought on enforceability versus deterrence

Non-compete agreements have always had a dual function: legal enforceability in the event of a violation, and deterrence of the violation in the first place. The deterrence function persists even when enforceability is uncertain — an employee who would have taken a competitive position may decline to do so if the employer's non-compete is aggressive on paper, even if the employee would ultimately prevail in litigation. That dynamic has been a significant part of how non-compete agreements actually function in the Connecticut labor market.

The 2023 amendment and the FTC rulemaking together are eroding the deterrence function. Employees and their counsel are more aware of the enforceability limitations, and the market cost of challenging a non-compete has come down. Employers whose non-compete strategy has relied on deterrence rather than actual enforcement should expect the deterrence to continue weakening, regardless of how the federal litigation resolves.

For employers reviewing non-compete programs, or for employees evaluating enforceability of an agreement they have been asked to sign, the L&E group handles the work on both sides.