UPDATE: after this post went to press, HB 251 was amended by substitution a second time and passed the House on a unanimous vote on February 24, 2016. As passed, the bill contained substantive changes to the provisions outlined in the post below. HB 251 is now headed to the Utah State Senate for consideration, where we will be tracking developments.
We recently posted here about a bill in the Utah State legislature, HB 251, which would have essentially prohibited non-competition agreements in Utah. While awaiting debate and final vote in the Utah House, the bill was amended by substitution. While the original bill had support from some in the Utah business community and at least one conservative political organization, the amendments were presumably made to address concerns by other segments of the business community.
The amended bill prohibits “post-employment restrictive covenants,” generally defined as agreements under which an employee promises not to directly or indirectly compete with an employer after the termination of employment. In short, the bill would make traditional non-competition agreements void in Utah. But, unlike the original HB 251, the amended bill expressly allows other kinds of restrictive covenants. The amended bill, for example, would allow
- Agreements to protect trade secrets and proprietary confidential information
- Agreements prohibiting solicitation of customers or employees
- Agreements to reimburse employers for specialized training, education or signing bonuses
- Agreements by business owners in connection with the sale of a business
The bill would impose a one-year temporal restriction on all of the allowed agreements identified above, except those relating to trade secrets.
It remains to be seen whether these amendments will adequately address concerns raised about the original bill. As of this writing, the amended bill has been “circled,” indicating a request by at least one legislator that the bill not move forward to debate and final vote at the present time. If the amended bill passes the House, it will then be referred to the Senate for consideration by the appropriate committee and the full body.
We will keep you apprised of developments on HB 251 on other legislative developments in Utah.