Utah and Idaho Continue Trend of State Legislatures’ Focusing on Non-Competes
Two western states, Utah and Idaho, have recently passed or amended their statutes dealing with post-employment restrictions on competition. This continues a national trend in which new state law in this area is increasingly the product of legislative action rather than judicial interpretation. Thus, even if an employer has no current presence in these states, it is worth one’s time to understand these changes because they could soon be coming your way.
In Utah, the legislature amended the two-year old Post-Employment Restrictions Act (which we had written about before) to limit the enforcement of non-compete agreements against employees in the broadcasting industry. The statute (HB 241) imposes a compensation test that precludes non-competes for broadcast industry employees making less than $47,476 annually, limits broadcast company employment contracts to four years or less, and nullifies any restriction that would limit competition beyond the original contract expiration date (meaning that an employee with a one year restriction who leaves a broadcast employer three months before contract expiration would have a three-month non-compete rather than a one-year non-compete). The amendment also allows enforcement only if the employee is either terminated “for cause,” or the employee breaches the employment contract “in a manner that results in” his or her separation, curious language that seems to leave unaddressed whether a non-compete can be enforced where a non-breaching employee simply resigns. While this amendment is certainly part of the trend of states (Arizona, Connecticut, the District of Columbia, Illinois, Maine, Massachusetts, and New York) having statutes specific to non-compete agreements in the broadcasting industry, it also fits in the broader trend of industry-specific limitations targeting an expanding list of industries and the even broader attack on non-compete agreements more generally.
The Idaho legislature also took action recently by amending its non-compete statute to remove an important pro-employer presumption applicable to non-compete agreements for “key” employees. The Idaho statute, Idaho Code §44-2701 et seq., had since 2016 included a provision (§44-2704(6)) providing that an employer would be entitled to a rebuttable presumption of irreparable harm when a key employee found that employer likely to succeed on its claim that the employee had violated the covenant. The legislature, in S 1287a, repealed that provision, restoring Idaho law to its pre-2016 status, as Idaho’s governor noted in his statement concerning the bill. The governor did not sign the bill, but simply allowed it to become law without his signature. He stated that he refrained from signing the bill because there was “no consensus” in the business community or the tech sector on such agreements, and went on to note that the next session of the legislature should re-adopt a modified version of the presumption provision just jettisoned. As in Utah, this legislative back-and-forth illustrates the continued attention states are paying to non-compete issues in political, rather than judicial, forums.