In the last few weeks, Utah and Idaho have each passed bills changing the landscape of non-compete enforceability in strikingly different ways. Utah’s law places further limitations on the use of non-competes. In contrast, the Idaho bill (expected to be signed by the governor shortly) permits greater enforceability of non-competes.
Utah Imposes New Restrictions on Non-Competes and Employers
On March 22, 2016, the Utah “Post-Employment Restrictions Act” was signed into law. This bill makes two main changes to Utah non-compete law:
- It limits the length of non-competes entered into on or after May 10, 2016 to one year after employment ends; and
- It provides that if an employer seeks to enforce a non-compete that is determined to be unenforceable, then the employer is liable for costs associated with arbitration, attorney fees and court costs, and actual damages.
The statute contains exceptions for non-solicitation agreements, non-disclosure agreements, severance agreements, and non-competes relating to the sale of a business.
Idaho Adopts Employer-Favorable Presumption of Irreparable Harm
The neighboring state of Idaho went in another direction just days later. House Bill 487 was delivered to the governor on March 25, 2016 and is expected to be signed into law. The bill provides:
If a court finds that a key employee or key independent contractor is in breach of an agreement or a covenant, a rebuttable presumption of irreparable harm has been established. To rebut such presumption, the key employee or key independent contractor must show that the key employee or key independent contractor has no ability to adversely affect the employer’s legitimate business interests.
Thus, in contrast to the new Utah law, the new Idaho bill will actually make it easier for employers to get a preliminary injunction to enforce their non-compete restrictions.
These changes serve as reminders for employers that statutory and common law rules governing non-competes vary widely from state to state, and they must monitor developments in any states where they have headquarters or employees. These contrasting pieces of legislation also demonstrate that the debate over the pros and cons of non-competes that is taking place in seemingly every state will continue to result in remarkably different outcomes. Non-compete laws remain very much a local affair.