March 3, 2017Client Alert

Utah Non-Compete Research Report Released

As many Utah employers are aware, in 2016, the Utah Legislature passed H.B. 251, which statutorily limited non-compete agreements to one year. That legislation sharply divided Utah’s business community. In its wake, concerned parties called for a study to research how Utah employers use non-compete agreements, how H.B. 251 has affected employers’ use of non-compete agreements, and whether additional revisions to the law were warranted.

In response, the Salt Lake Chamber worked with the Utah Legislature, the Labor and Employment Section of the Utah State Bar, industry associations, and chambers across the state for a comprehensive study of employer and employee perspectives on this issue. The study utilized wide-ranging surveys, as well as focus groups with varying professionals, including Michael Best Partner Lisa Petersen, who represented the interests of employers in a focus group comprised of employment law practitioners. The results of the study, which was conducted by the Cicero Group, have now been released.

From a legislative perspective, the immediate response to the study is that there will not be any new non-compete legislation in 2017. This is not surprising, however, given the legislative session is nearly closed. Representative Mike Schultz, who sponsored H.B. 251 last year, issued a statement after the report was released and stated the following: “Rather than running legislation on non-compete agreements this year, myself and Rep. Hawkes remain committed to working with our group and other stakeholders to utilize this research and to build the optimal solution for Utah’s long-term economic health.”

As for the details of the report itself, Utah employers will be interested to review its contents, as it addresses non-compete agreements on numerous levels. One striking statistic from the report shows that 90% of employers and 74% of employees agree that non-compete agreements should be allowed, so long as they are reasonable. Not surprisingly, however, there is somewhat of a divergence of opinions as to what constitutes a “reasonable” non-compete agreement. Also of interest are statistics related to the impact of H.B. 251. Roughly 57% of employers say H.B. 251 will have little to no impact on their organization. In contrast, 36% of employers state that it will have a negative impact.

For now, Utah employers can expect the post-H.B. 251 status quo to remain intact, at least for another year. It is possible, however, that further legislation may be introduced in 2018.

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