Imagine for a moment that you are a Utah small business owner. You mortgaged your home to start your fledgling business, and it is growing, slowly but steadily. You entrust a key employee with valuable information about your company and introduce him to your clients, all with the intent to grow the business.
But then that employee, that trusted employee, sees an opportunity. He unexpectedly resigns from your business on a Friday and starts his own directly competing business the following Monday across the street from you, fully equipped with the knowledge, experience, skill, reputation and relationships that you provided to him.
To prevent this from happening and to support the growth of business, the state of Utah — as well as almost every other state in the Union — permits an employer to enter into non-compete agreements with its employees. The non-compete agreement cannot be draconian; courts require that they must be reasonable and limited in duration and geographic scope. Non-compete agreements have been the law in Utah for over half a century.
Utah House Bill 251, which passed unanimously in the House Feb. 24, bans non-compete agreements under almost all circumstances. Proponents of HB251 are quick to point out that the bill still permits an employer to implement and enforce agreements that require former employees to honor confidentiality agreements, not to appropriate trade secrets and to refrain from soliciting the employer's customers. But this is all window dressing on a bad bill.
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