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Amid heavy lobbying by businesses, the Senate on Tuesday voted to reverse the meaning and intent of a House-passed bill that had sought to prohibit clauses in contracts that ban employees from working for competitors after they leave jobs.
The House earlier had unanimously passed HB251 to prohibit those "non-compete" clauses. But the Senate substituted it Tuesday to allow them to continue, with just two restrictions.
The changes would limit non-compete agreements to one year after an employee left a job. Also, if an employer tried to enforce a non-compete clause but lost the legal action, the company could be held liable for the court costs.
"What's left?" Senate Democratic Leader Gene Davis, D-Salt Lake City, asked after the bill overhaul. Sen. Stuart Adams, R-Layton, proposed the changes and defended them. "What we set up here is a way to self govern. If you put a penalty provision in place, you're going to deal with some of those employers that are acting improperly."
The Senate approved the substitute measure 22-6 in the first of two required votes.
The Salt Lake Chamber and other business interests had fought hard against HB251, arguing that non-compete clauses are important to protect many companies and their secrets.
Salt Lake Chamber President and CEO Lane Beattie, a former Senate president, issued a statement Tuesday praising the amended bill as "a positive development for all involved." He pledged to work with lawmakers if they would like to take a few months to study the issue. Battling for an outright ban on non-complete clauses was House Speaker Greg Hughes and several high-tech companies.
Josh James, CEO of Domo and founder of Omniture (later sold to Adobe for $1.8 billion) said last week, "We think non-competes are un-American." Hughes has said the issue is especially important in Utah because it is a right-to-work state, where employers may fire workers for any reason.
"If you are a right-to-work state, the public needs the right to walk. Fire them for any reason, but they have to be able to fill out an application and get a job," he said. "This was never meant to be employees as property" where some companies essentially could fire people and keep them from working in the field.
Dave Elkington, CEO of Insidesales.com, said last week that doing away with non-compete provisions would "bring a lot of talent into Utah."
Also, he said it would spur innovation and help Utah's economy by allowing more people to start their own companies.