Utah HB 251: What a Difference a Day Makes

scales-of-justice-glossy-mdWell, last we talked, Utah House Bill 251 had passed the House of Representatives and had just been assigned to the Senate Business and Labor Committee. It’s purpose was protect employees from overly onerous non-compete agreements. To that end, it allowed such agreements if (1) they protected only “trade secrets,” “proprietary information or processe[s],” or the employer’s “business relations” with customers and employees, and if (2) the agreements were only for a “reasonable time period or scope” or “within a reasonable market.” Courts have already kind of settled on two years as a reasonable time under current law.

The purpose of the proposed law was to allow ex-employees to immediately go out into the workforce and continue plying their trade, so long as they didn’t disclose trade secrets and proprietary information or steal existing clients from their former employers.

But don’t trouble yourself just yet over the wording just stated above. Apparently the Senate Business and Labor Committee has red pens and pencils in its chambers because the language of the bill has changed substantially. First the good news:

  1. “Post-employment restrictive covenants,” that is, non-compete agreements, can’t run longer than one year–so long “reasonable time period”; hello a concrete time limit–and
  2. The employer must provide adequate consideration for the agreement “aside from continued employment.”

I like those provisions, though I’d rather the one year be reduced even further, six months, for example.

Now the not-as-good news:

  1. The bill attempts to allow employers to prevent ex-employees from only directly competing with or working for a direct competitor of the employer. I like the sentiment, and it appears to be a good-faith effort to draw a line in the sand; however, that language and the language of the definition of “direct competitor” still places a lot of power in the hands of the old employer, who probably thinks anything that moves is a direct competitor. As I wrote in my previous post on this subject, the language of this bill and the language in a non-compete agreement means what the employer says it means until a court says otherwise. In other words, the threat of suit is always there, which is one reason I’m not a fan of non-competes.
  2. The bill attempts to define what “proprietary or confidential information” and dismisses employees in “common callings” from the class of employees who might have knowledge of such information. Again, the effort is there, but the language of the bill lets the worried employee down.

I’d have to say that on the whole, I like this bill better than the first, but that I’m still worried about the basic idea of giving essentially a complete stranger power over the life of another complete stranger for one year or two years or a reasonable time period. What do I mean by that? Well, these agreements often come into being at the time a person becomes an employee.  At that moment, the new employee doesn’t know much about the employer–they’re virtual strangers in other words. I find that disturbing.

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