Non-Compete Bill Passes Utah House Business and Labor Committee

Utah House Bill 81, which amends Utah’s non-compete agreement statute, continues to progress in the Utah Legislature.  Last Monday (February 6), the House Business and Labor Committee gave a favorable recommendation to the bill on a 6-5-3 vote.  Among other things, the bill would require employers to pay additional “consideration,” such as a wage increase or a promotion, in order to enforce any non-compete agreement imposed on an existing employee.

Sponsor Brian Greene urged the committee to adopt the bill, citing situations where employers have required current employees to sign non-compete agreements and then terminated the employment a short time later.  Representative Greene argued that tech employers have used this strategy to tie up employee developers during slow periods of the employer’s business cycle without having to pay them.

Vance Checketts, VP at Dell EMC, spoke out against the bill.  Mr. Checketts pointed to an extensive study currently being conducted by the Cicero Group.  The study is seeking additional data and facts related to non-compete agreements in Utah.  Mr. Checketts argued that no further action should be taken on this hotly contested issue until the study is completed.

Chad Berbert, a principal at Cicero Group, which has been commissioned to conduct the study, also addressed the Committee.  He explained that Cicero is currently conducting a comprehensive study of non-competes in Utah.  They have received survey responses from 2,000 employees and 756 employers so far.  They will also be conducting focus-group studies with numerous interested groups.  Mr. Berbert anticipates issuing a report on February 24.  (It seems unlikely that the report will be available in time for the legislature to react during the 2017 session.)

The main argument against the bill was that the Committee should wait until the Cicero study is completed before taking further legislative action on non-compete agreements.  Other members of the public who spoke out in opposition to the bill included:

• Justin Olson, an attorney at C.R. England and England Logistics
• Kelly Slone, President and CEO of BioUtah
• Keith McMullin, President and CEO of Deseret Management Corporation, speaking on behalf of the Salt Lake Chamber of Commerce
• Michael Blackburn, an employee of England Logistics
• Mark Griffin, in house counsel at Overstock.com
• Bryan Benard, attorney at Holland & Hart
• Rona Rahlf, President of the Utah Valley Chamber of Commerce

One member of the public spoke in favor of the bill:

• Dallin Barker, an individual who has experienced the restrictions of a non-compete agreement as an employee.

For questions or more information about non-compete agreements, please contact SCM attorney Keith A. Call.