SALT LAKE CITY — Utah lawmakers passed a bill that limits non-compete agreements on the last day of the Legislature.
Non-compete agreements are typically issued by businesses to employees as a condition for hiring. These agreements limit employees and former employees from becoming employed by competing businesses.
HB251 does two main things. First, it limits non-compete agreements to one year. This is an attempt to balance the desires of all parties.
Second, it changes the actions an employee can take against a former employer. Under this bill, if an employer tries to enforce a non-compete agreement and the court finds that it cannot be enforced, the employer has to pay the attorney fee and damages to the employee.
Rep. Mike Shultz, R-Hooper, is the House sponsor of the bill, though he doesn’t stand alone in his support. Nineteen other members of the state Legislature are currently co-sponsoring this bill.
Schultz described how non-compete agreements could be detrimental to business in Utah. “Former employees had been abused by employers who abused non-compete agreements. They should be able to start their own business,” said Shultz.
The Senate floor was filled with passionate speeches from prominent businessmen, including Josh James, CEO and founder of Domo. James announced that his company would discontinue all their non-compete agreements.
“We think that non-competes fight against innovation. They aren’t entrepreneur friendly. They aren’t business friendly,” said James.
Opponents to the bill argued that non-competes ensure fair competition in the market. They further explained that each company makes an investment in hiring and training their employees, so non-competes are ethical.
Currently Utah ranks first in patents issued in technology, ranking above even Silicon Valley, even with the status of non-compete agreements. Additionally, 47 states currently do not have bans on non-compete agreements. The success of the state, has left opponents to argue that government intervention could have a detrimental effect on Utah’s business friendly economy.
Scott Beckett, CEO of CHG Healthcare, believes HB251 will cost Utah jobs.
“Every one of our employees signs a non-compete agreement to help protect the large amount of training that we invest,” Beckett said. He went on to explain that Utah is thriving and that the government should not do anything to disrupt that.
