Wednesday, March 9, 2016

Business Lobby Dilutes Workers' Rights Bill

Anti-noncompete bill will pass, but it no longer bans the practice.

Posted By on March 9, 2016, 6:35 PM

click to enlarge Rep. Mike Schultz, R-Whooper. - UTAH HOUSE STAFF
  • Utah House Staff
  • Rep. Mike Schultz, R-Whooper.
A bill favoring workers' rights passed through the Senate on Wednesday, but it was so watered down, it’s questionable how much good the bill will do.

When it was introduced by Rep. Mike Schultz, R-Hooper, House Bill 251 would have banned noncompete agreements—contracts employees are required to sign by their employers that forbid them from going to work for a competitor when they leave their current employment. Because Utah is an at-will state, it doesn’t matter if you voluntarily quit or are fired, if you signed a "noncompete," you are prohibited from working for one of your former employer’s competitors, usually for a certain number of months or years.

Such restrictions can be hard on families. If a parent is fired from a job as, say, a computer programmer, the noncompete agreement could prohibit her or him from getting another programming job in Utah, forcing the employee to uproot the family and leave the state or find a different career altogether.

“These noncompete [contracts] are just awful,” House Speaker Greg Hughes, R-Draper, says. Hughes has been one of the primary supporters of the bill, even accusing some in the local media of hypocrisy for not disclosing their use of the contracts while speaking against the bill. “[Noncompetes] allow companies to treat their employees like property, because they know it’s extremely unlikely an employee will quit because they can’t just go and get another job.”

Schultz’s bill made it through the House relatively easily. But it ran into trouble almost immediately in the Senate as the business lobby organized against it, arguing that not only is it unfair for a business to invest in the training of an employee who then might go to work for a competitor, but that, without noncompetes, former employees might give away trade secrets when they find their new job.

“It’s funny,” Schultz told City Weekly, “this is something that would actually be really good for the economy. For every business out there that has a noncompete agreement, they probably have a competitor who doesn’t. I think there were just several businesses who want to keep using these and organized against [the bill's original language].”

As various lobbies and special interests weighed in, there were at least 10 different substitutions made to HB251 before it cleared the Senate.

In the end, the bill now allows noncompetes to continue, although it limits them to a duration of one year after an employee leaves a job. Current noncompete agreements are exempt, so the bill would only impact future contracts.

“I was disappointed,” Schultz says. “[Noncompetes] just aren’t fair to employees. Under the original version of the bill, a business could easily protect its trade secrets with nondisclosure agreements without using a noncompete. We wouldn’t have Apple computers or Apple products today if Steve Jobs had been under a noncompete agreement with Hewlett-Packard and had been banned from leaving and starting up a competing business. There are thousands of businesses like that.”

The full House still has to vote to agree to the changes the Senate made to Schultz’s bill, but the junior Republican says he isn’t going to oppose them.

“We at least moved the needle and got the conversation started,” Schultz says. “This is going to be back next year, and I’m going to keep working on it. Sometimes you just gotta take steps to get to where you want to be going.”

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