House Bill 251—the Post-Employment Restrictions Act—is making its way through the Utah State Legislature and, if passed, would outlaw non-compete agreements in the State of Utah. The bill is sponsored by Representative Mike Schultz, a Republican located in Hooper, Utah.
The language of H.B. 251 is broad and prohibits agreements that restrict individuals from doing any of the following beyond the termination of their employment:
- Providing “products, processes, or services that are similar to the employer’s products, process, or services”;
- Working in the same industry as the employer; or
- Owning any interest in an entity that provides products, processes or services that are similar to the employer’s products, processes or services. Utah Code Ann. (Proposed) § 34-51-201(1).
There is also a provision in the bill, however, stating the bill should not be interpreted as prohibiting post-employment restrictions that are not covered by H.B. 251. Utah Code Ann. (Proposed) § 34-51-201(2). Accordingly, it appears that H.B. 251 does not prohibit confidentiality agreements or narrowly tailored non-solicitation provisions that extend beyond termination of employment.
Under H.B. 251, if an employer seeks to enforce a post-employment restriction by filing a court action, and it is determined that the post-employment restriction is prohibited, the employer will be liable for the former employee’s attorneys’ fees, court costs and actual damages. Utah Code Ann. (Proposed) § 34-51-301.
Although H.B. 251 was only recently introduced, it easily passed through the House Business & Labor Committee with a “favorable recommendation” by a unanimous vote of 11-0 on February 11, 2016. It is still early in the legislative process for H.B. 251, but the ease with which it passed through committee should give Utah employers pause. We will continue to monitor H.B. 251 and notify you of any changes.
For more information, please contact your Michael Best attorney; Lisa R. Petersen at firstname.lastname@example.org or 801.833.0483; or Judson D. Stelter at email@example.com or 385.695.6454.