Utah lawmakers debate non-compete agreements, bill advancing to full Senate

Posted at 10:09 PM, Mar 04, 2016
and last updated 2016-03-05 00:09:58-05

SALT LAKE CITY -- Dozens of business leaders and employees packed a legislative committee meeting Friday night, talking about non-compete agreements.

House Bill 251 has become a hot issue on Utah’s Capitol Hill. The Senate Business and Labor review board favorably recommended the bill with a 5-to-1 vote, but not without hearing from many people who were for and against.

The bill, sponsored by State Representative Mike Shultz, R–Hooper, would limit the use of non-compete agreements by Utah businesses. Non-compete agreements are common practice in several industries, including technology, sales, and broadcast media.

FOX 13 News uses non-compete agreements with many of their employees, mostly on-air talent.

The purpose of the agreements is to protect the company’s trade secrets, but House Speaker Greg Hughes says those agreements often damage the employee who signs them.

“We don’t want to be a state where we think that employees are property, because they’re not,” Hughes said.

Employees testified at the hearing they’ve seen non-compete agreements damage careers, limiting where an employee can work after leaving a company. They say it stifles Utah’s job force by forcing them to go out of state.

“Post employment non-compete agreements, even where unenforceable, take advantage of employees' lack of sophistication,” said U of U law student Chris Law.

Tech company DOMO also testified in support of the bill. Earlier in the day, DOMO founder Josh James announced the dismissal of the majority of non-compete agreements for their employees.

“I think non-competes are un-American,” James said.

Opponents of the measure are concerned with protecting the interests of business owners, primarily trade secrets that have made their business successful. The concern is that without a non-compete agreement, an employee could take those successful tools and start a competing business, or go work for a direct competitor.

The first draft of Shultz's bill wouldn’t have protected those things, but he said the current version does.

“It allows an employer to be able to protect his legitimate business interests, as far as proprietary, confidential information, basically the secret sauce if you will of that company,” Shultz said. “But it doesn’t allow an employer to keep handcuffs on an employee as a way for job retention.”

Opponents also argued Utah’s rankings as a top business environment are proof things don’t need to be changed.

“We do recognize that there are some folks out there who are abusing these agreements,” said TJ England, Vice President of trucking company C.R. England. “But we think that we need to have a reasonable approach that allows folks to use these in an appropriate way.”

Senators worried about some of the language in the bill, specifically as it could be interpreted. Still, they favorably passed the bill out of committee. It will be heard by the full Senate next week.