Fight Over Non-Compete Contracts Flaring Up in Legislature’s Final Days

Utah State Capitol 14

Big business usually gets what it wants from the Utah Legislature.

As lawmakers rush to adjourn their 2016 session next Thursday, a big-business/employee battle is blazing – the outcome uncertain.

Put simply, it is some leading CEOs vs. House Speaker Greg Hughes/House GOP caucus.

Rarely do these two sides find themselves at odds.

And what happens to HB251, sponsored by a Hughes acolyte, Rep. Mike Schultz, R-Hooper, in the Utah Senate these final few days will be interesting to watch.

Thursday afternoon Josh James, a young Utah billionaire who has started several high-tech firms in Utah County, addressed the House and Senate GOP caucuses on behalf of HB251, which would outlaw employer/employee non-compete agreements in many cases.

The Salt Lake Chamber – which finds itself in the middle of the battle —  sent out a mass email earlier this week saying the bill has quickly become the major issue for the leading business group.

The email asked Chamber members to get active in solving the conflict, saying: “This issue is the single highest priority for the Chamber in this legislative session, as we continue to work to ensure that preserving reasonable and responsible uses of non-compete agreements remains a tool for you and your businesses. We are working directly with Rep. Schultz, the bill’s sponsor, to find common ground on a path forward.”

Friday morning Hughes, Schultz, James and others called a press conference to challenge HB251 opponents. Several big firms at the press conference announced they were getting rid of their non-compete agreements on their own.

After the Deseret News had written an editorial against HB251, Hughes and Schultz wrote a response saying, in part, that businesses owned by the LDS Church (which owns the newspaper) makes some of its employees sign non-compete contracts itself.

Hughes told his GOP caucus Thursday that various big employers are “abusing” non-compete agreements “far and wide.”

A non-compete is an agreement the employer makes an employee sign at their hiring which says the employee won’t compete in a similar business for a set period after leaving the company.

Many states have these non-competes, says the bill opponents. California and a few others outlaw them in most cases.

James said that especially in high-tech firms they are common. And they harm the free market and creative development.

Trade secrets would be protected under the bill, says Hughes and James.

But any employee should be free to leave one employer and go to work for another in the same field – hopefully at higher pay – as long as they don’t take the original company’s trade secrets and future patents.

Hughes claims if employees can’t move freely, and are forced to stay with their non-compete employer, then a real alternative is to form worker unions to protect their rights.

“We don’t want that,” said Hughes, noting that Utah is a right to work state.

Chamber president Lane Beattie, a former state Senate president, wrote in his email: “We want to also acknowledge our working partnerships with Utah Technology Council, Utah Manufacturers Association, BioUtah and many other business associations and business leaders who are helping to unite the voice of the business community around this issue.”

It’s a strange place for Hughes, a private businessman himself, and Schultz, a successful homebuilder, to find themselves in.

HB251 passed a House standing committee and passed the House floor unanimously.

The fight now moves to the state Senate – also a place where big business has had significant support in the past.