SCM NEWS & OPINIONS

Prepare for Another Fight Over Non-Compete Agreements on Utah’s Capitol Hill

One of the most talked-about bills in the 2016 Utah Legislative session was House Bill 251, the Post-Employment Restrictions Act.  After a version of the bill passed the House of Representatives by a vote of 70-0-3, it caught the attention of the business community and a bit of a firestorm erupted.  With several substitutions and amendments, a watered-down version of the bill was eventually adopted, and Governor Herbert signed it into law on March 22, 2016.

As enacted, the law applies only to non-compete agreements entered on or after May 10, 2016, and it limits the length of any non-compete period to one year.  The law also gives some leverage to former employees by allowing them to collect attorneys’ fees and costs if a former employer sues to enforce an invalid non-compete agreement. The law does not apply to confidentiality agreements, non-solicitation agreements, severance agreements or non-compete agreements related to the sale of a business. 

We have been hearing for months that the fight is not over, and that the issues surrounding H.B. 251 would likely resurface in the 2017 Legislative Session.  Well, get ready for Round 2.

Representative Brian Greene, a co-sponsor of H.B. 251, has already introduced a bill expanding its reach for the 2017 session – H.B. 81.  As currently written, the employee-friendly 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.  It would also prevent employers from enforcing non-compete agreements if they fire the employee within one year after the employee signs the agreement.  Finally, employers would be forced to bring enforcement actions, if at all, during the non-compete period.  They could not bring suit after the non-compete period expires.

This will likely not be the end of the issue and we expect that H.B. 81 will inspire lively debate.  We are also interested to see if additional bills related to this topic are introduced.  Stay tuned for more developments as the 2017 Session progresses.  We will be posting regular updates.

Contact any one of our SCM attorneys with experience dealing with non-compete agreements: Keith A. CallMaralyn M. English, or Robert T. Denny.