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Bill Voiding Noncompete Agreements in Event of Merger Vetoed By Governor

Posted in Highlight, Legislative Developments

Last month, the General Assembly passed a bill in the closing hours of the legislative session that would have voided certain non-compete agreements in the event that a business was merged or acquired.  It was a watered-down version of a bill that had been weaving its way through the legislature that would have placed limits on all non-compete agreements.

Malloy Vetoes Noncompete Bill

But even this watered down version of the bill was not good enough for Governor Malloy.

On Friday, the Governor vetoed it with a short message. In it, he complained that the bill left “certain key terms undefined or unclear.”

“As a result” he added, this bill has the potential to produce legal uncertainty and ambiguity in the event of a merger or acquisition.   If I signed into law, costly and time-consuming litigation would likely be required to provide necessary clarity. It would be better for both employers and employees to receive greater clarity from the General Assembly on this issue next session.”

He did leave the door open for a revised bill next year though.  He signaled, for example, that “additional protections for employees may be warranted to guarantee a reasonable period of time to review a written non-compete agreement.”

For employers, this means that the issue of non-compete agreements is essentially dead for another legislative year.  Will this get brought up for a vote in 2014, when more politicians are up for re-election? That remains to be seen.

At least for now, though, employers can go through mergers and acquisitions without worry of at least this aspect of the law.