tech industry agreements employee many utahs bill

techsuch May 9, 2021 0 Comments

Non-competes: A divisive issue in Utah’s tech industryNon-compete agreements were a hot topic during this year’s legislativesession, with Utah’s tech community weighing in on both sides of the issue. Infact, Richard Nelson, CEO of the Utah Tech Council, says he’s never seen thestate’s tech industry as divided over a single issue as he saw during the 2016Legislative Session regarding non-compete agreements.“Our tech companies felt strongly about this issue. Some wanted to keep non-competes. Startups didn’t want the industry to keep them,” Nelson says.After 10 revisions and several rounds of debate, with prominent tech leaderslike Domo’s Josh James and Overstock’s Jonathan Johnson weighing in, HB 251passed during the session’s final week. The bill revised non-competeagreements between employers and employees, creating a one-year post-employment restriction amendment. The amendment regulates the use of non-compete employee contracts, restricting both the employer and employee fromentering into a non-compete agreement for more than one year after theindividual’s employment has ended. The bill also makes it so businesses wholegally pursue non-compete agreements must pay all legal fees if they lose thecase. The bill applies to all businesses, regardless of employee size.Both sides weigh inA non-compete agreement or clause is an agreement between two parties,typically employer and employee, in which the employee agrees not to enterinto a trade or similar profession using information learned during employmentfor a set period of time. Some argue that it benefits the company, whichtypically puts time and resources into training employees. Proponents say non-competes also serve as a retention tool.On the other side of the debate, some argue that non-compete agreements putindividuals at a competitive disadvantage, as it makes leaving a job moredifficult. The end result, they argue, can weaken an entire industry. Many inthe tech industry note that California—and thus, Silicon Valley—prohibits non-competes.Scott Askew, general counsel of SirsiDynix, a Lehi-based company that developstechnologies to enhance libraries, is in favor of non-compete agreements. Hebelieves they play an integral role in the business community.“Non-competes are considered to be an important part of protecting a company’sinvestment in intellectual property and other assets,” he explains. “Like manyindustries, we have competitors that would love to have the knowledge we’vecreated by investing in our employees. Non-competes encourage businesses toinvest in employees and to do business in Utah.”Askew doesn’t believe this year’s bill necessarily hurts or helps Utah’s techindustry, but he does believe that total elimination of non-competeagreements, which has been discussed in the past, could negatively impact thestate’s economy. “Elimination of non-competes would create the image thatUtah, like California, is not an employer-friendly state,” he says. “It couldhave a negative impact on economic growth.”Brandon Tidwell, managing director of Signal Peak, a venture capital andgrowth equity firm, is on the other side of the issue. “I think [non-competes]are a drag on the Utah technology industry, which is why I and my partnersjoined other great technology companies in the state (Domo, Qualtrics andInsideSales) in speaking out in favor of eliminating them.“As a general rule, we think people should be able to work where they want to,and it is incumbent upon good companies to create an environment where theiremployees would rather work for them than their competitors,” he says. “Beyondthat, experience and academic research has demonstrated time and again thatecosystems where talent is mobile are more dynamic and innovative. Thespillover of knowledge and talent into the broader ecosystem is good foreveryone.”Tidwell hopes to see non-competes eventually eliminated from Utah’s businesscommunity. “I wish [HB 251] had gone further, but it is an improvement on thestatus quo,” he says. “I have many friends in the Utah business community thatfeel differently about this issue, and I am pleased we were able to reach acompromise that at least limits these types of agreements to 12 months.”Nelson agrees that HB 251 was a solid compromise. “It was a very positiveresolution, and it was a good thing for the industry,” he says. “Our industryand others had overreached on putting too many employees under non-competeagreements, so this came as a result. In the end it was a good compromise thatwe embraced.”

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