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Utah Hopes That Third Time’s a Charm for Non-Compete Statute

The State of Utah on March 22, 2019 returned to the topic of non-competes for the third time in three years. It had passed that statute in 2016 (as we noted), and then amended in 2018 (as we also discussed here earlier), and now is at it again, by amending it once more. Maybe they are hoping that the third time’s a charm, as they say.

It seems that, like Goldilocks, the broadcasting industry found the original 2016 statutory bed to be a little too hard for it to sleep in. As we discussed at the time:

The State of Utah recently enacted Utah Code Annotated 34-51-101 et seq., the so-called Post-Employment Restrictions Amendments, which limit restrictive covenants entered into on or after May 10, 2016 to a one-year time period from termination. Although this could curtail certain employers’ plans, the amendments enacted provide some important exceptions and are in fact much more favorable to employers than those first proposed, which would have precluded virtually all post-employment restrictions in Utah.

[Utah Restricts Post-Employment Restrictions By James P. Flynn on April 6, 2016]

Thus, in 2018, the statute was amended to provide certain rules to apply specifically to the broadcasting industry:

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.

[Utah and Idaho Continue Trend of State Legislatures’ Focusing on Non-Competes By James P. Flynn on April 16, 2018]

Evidently, somebody must have felt that this was too soft on the enforcement of contracts negotiated at arms’ length in the broadcasting industry because it precluded consenting parties from agreeing to contracts of more than four years. So now the statute has removed the four-year cap and replaced it with an amended provision stating that a broadcasting industry non-compete may be included as “part of a written contract of reasonable duration, based on industry standards, the position, the broadcasting employee’s experience, geography, and the parties’ unique circumstances.” Thus, less than three years after enacting the statute and less than one year after trying to put that industry-specific exception to bed, the Utah legislature jumped at the chance to nestle into a result that it must hope “was just right.” I guess we will see.

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About this Author

James P. Flynn, Epstein Becker Green, Corporate Counseling Lawyer, complex commercial matters attorney,
General Counsel

JAMES P. FLYNN is a Member of the Firm in the Litigation and Labor and Employment practices. He serves as the General Counsel of Epstein Becker Green and the Managing Shareholder of the firm's Newark office, where he is based. His practice focuses on civil litigation and corporate counseling, including trial and appellate work in the area of intellectual property, complex commercial matters, and employment law. Mr. Flynn represents businesses in a broad spectrum of industries, including health care, pharmaceuticals, and financial services.

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