The Utah Business website just came out with an article on what employees and employers in Utah think of non-compete clauses. There are large debates on the Utah Capital right now as to the validity of such clauses. So far, those for the employers are winning. However, despite what some think, there is still a legal standard to see if the non-compete clause is even legal or enforceable.
The problem with non-compete clauses is they keep an employer from going to another company that may compete against the company. The issue arises where an individual may not be able to find work elsewhere because of a non-compete clause. Some non-compete clauses are too broad and cast a burden on the employee. There are many trucking companies that have non-compete clauses for their drivers and many are so broad that it essentially makes it impossible for a driver to drive with another trucking company and forces them to stay with their trucking company.
These types of clauses fall below the standard that Utah has implemented as to the validity of such clauses.
The main purpose of a non-compete clause is that through time, some employees have become a major investment with their knowledge of the company and the industry, some companies pay for the tuition of their workers to go to grad school or pay for the student loans, so the purpose of the non-compete clause is to protect the financial investment the company has made on that individual.
If the purpose is just to keep truck drivers from going to other truck-driving companies because the drivers are unhappy with the trucking company, then that is not a valid reason. Many driving companies also claim that they have paid for the education of the driver, in that they paid for sessions for them to pass the course to get their CDL license. For them to drive and might claim that they made an investment into their education.
Many trucking companies, however, implement language where they give a “loan” for that education and expect the driver to pay that money back through their working with them. If they decide to quit, then that loan amount would be due in full. So an argument for an investment would be unlikely in that situation, but instead it is more of a scheme to make more money off of their drivers without compensation. Since they call it education, the drivers don’t get pay for their training, they instead incur debt with the loan amount they enter.
In Scenic Aviation there is language in there that says that if the purpose of the non-compete agreement is just for the sole purpose of drawing competition down from other companies in regards to work-force then that isn’t a valid enough reason to be enforceable.
The case also states that the non-compete clause has to be tied to a specific geographic location to be enforceable. The court also weighs the balance of the purpose of the non-compete clause and the undue-hardship on the employee. Also, since it isn’t tied to a geographic location, there are issues to enforceability under the privileges and immunities clause. SCENIC AVIATION, INC. V. BLICK, (D.UTAH 2003).
Also, if it isn’t tied to a geographic location, there are issues to enforceability under the privileges and immunities clause, not allowing individuals to work or move where they want to without a valid reason.
So even if a company says that their is legislation that says they can enforce a non-compete clause, or that legislation still has to meet the standard set forth in Scenic Aviation, Inc for it to be enforceable. If you have questions about the enforceability of a non-compete clause, feel free to give us a call and we can review your case for you.