Dive Brief:
- Last week the Utah state legislature passed a compromise law aimed at curtailing the duration of non-compete clauses in worker contracts, according to the National Law Review.
- The new law came after several weeks of negotiating between state elected officials and businesses, and only affects non-compete clauses created on or after May 10, 2016 meaning current agreements are grandfathered in, the National Law Review reports.
- The original bill would have completely outlawed non-compete agreements. Instead, the new law limited the non-compete's legal length to one year from termination (though there are some exemptions). Anything beyond that would not be legally binding.
Dive Insight
The National Law Review article, from the law firm of Holland and Hart, reports that the Utah bill is "vastly superior" for Utah employers compared to the original complete ban bill from earlier this year. Mainly, Utah employers will not lose the ability to limit competitive activities after a valid employee termination.
Attorneys who wrote the National Law Review article say employers expecting to use a non-compete (or any other post-employment restrictions on certain employees) should review their policies to ensure any actions would be legal under Utah’s new law.
The use of non-competes has been in the news of late, mainly because some smaller businesses are accusing larger ones of using non-compete for reasons other than protecting intellectual property, which is the reason the laws exist. Within the past two weeks, Massachusetts began looking at a similar one-year limit on non-compete agreements because some smaller businesses believe such agreements may drive away young talent and high-skilled workers to other states where non-competes are illegal (California, North Dakota and Oklahoma).
