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Rise & Shine CLE
To Compete or Not Compete?
That Is the Legislation
Panel Members
Christina Jepson
Lauren Scholnick
Nathan...
2
3
Post Employment Restrictions Act
 34-51-101 to 301(General Labor Code)
 Fury of legislative activity
 4 sections
– De...
4
As used in this chapter:
(1) (a) "Post-employment restrictive covenant," also
known as a "covenant not to compete" or "n...
5
(b) "Post-employment restrictive covenant" does not
include nonsolicitation agreements or
nondisclosure or confidentiali...
6
34-51-201. Post-employment restrictive covenants.
In addition to any requirements imposed under
common law, for a post-e...
7
34-51-202. Exceptions.
(1) This chapter does not prohibit a reasonable
severance agreement mutually and freely agreed
up...
8
(2) This chapter does not prohibit a post-employment
restrictive covenant related to or arising out of the sale
of a bus...
9
34-51-301. Award of arbitration costs, attorney
fees and court costs, and damages.
If an employer seeks to enforce a pos...
10
“Restrictive covenants are generally upheld by the
courts where they are necessary for the protection
of the business f...
11
“Covenants not to compete are enforceable
if carefully drawn to protect only the
legitimate interests of the employer.”...
12
 Consideration
 No bad faith in negotiations
 Necessary to protect some legitimate
interest
 Reasonable in time and...
13
 Under Utah law, continued employment, in and
of itself, may be sufficient consideration to
support a non-compete agre...
14
The reasonableness of a non-compete
agreement depends upon several factors,
including the duration and geographical
sco...
15
 Information that derives economic value
from not being generally known
 Not readily ascertainable by proper means
 ...
16
“Upon termination of his employment, an
employee has the prerogative to use his general
knowledge, experience, memory a...
17
Thank You
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To Compete or Not Compete? That is the Legislation

Rise and Shine CLE presented on May 26, 2016 in Salt Lake City, Utah before the Litigation Section of the Utah State Bar. Christina M. Jepson

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To Compete or Not Compete? That is the Legislation

  1. 1. Rise & Shine CLE To Compete or Not Compete? That Is the Legislation Panel Members Christina Jepson Lauren Scholnick Nathan Thomas Erik A. Christiansen May 26, 2016 | Salt Lake City, Utah parsonsbehle.com
  2. 2. 2
  3. 3. 3 Post Employment Restrictions Act  34-51-101 to 301(General Labor Code)  Fury of legislative activity  4 sections – Definitions of post-employment restrictive covenant – Post-employment restrictive covenants limited to one year – Exceptions – Remedies • Award of arbitration cots, attorney fees and court costs, and damages
  4. 4. 4 As used in this chapter: (1) (a) "Post-employment restrictive covenant," also known as a "covenant not to compete" or "noncompete agreement," means an agreement, written or oral, between an employer and employee under which the employee agrees that the employee, either alone or as an employee of another person, will not compete with the employer in providing products, processes, or services that are similar to the employer's products, processes, or services.
  5. 5. 5 (b) "Post-employment restrictive covenant" does not include nonsolicitation agreements or nondisclosure or confidentiality agreements.
  6. 6. 6 34-51-201. Post-employment restrictive covenants. In addition to any requirements imposed under common law, for a post-employment restrictive covenant entered into on or after May 10, 2016, an employer and an employee may not enter into a post- employment restrictive covenant for a period of more than one year from the day on which the employee is no longer employed by the employer. A post- employment restrictive covenant that violates this section is void.
  7. 7. 7 34-51-202. Exceptions. (1) This chapter does not prohibit a reasonable severance agreement mutually and freely agreed upon in good faith at or after the time of termination that includes a post-employment restrictive covenant. A severance agreement remains subject to any requirements imposed under common law.
  8. 8. 8 (2) This chapter does not prohibit a post-employment restrictive covenant related to or arising out of the sale of a business, if the individual subject to the restrictive covenant receives value related to the sale of the business.
  9. 9. 9 34-51-301. Award of arbitration costs, attorney fees and court costs, and damages. If an employer seeks to enforce a post-employment restrictive covenant through arbitration or by filing a civil action and it is determined that the post- employment restrictive covenant is unenforceable, the employer is liable for the employee's: (1) costs associated with arbitration; (2) attorney fees and court costs; and (3) actual damages.
  10. 10. 10 “Restrictive covenants are generally upheld by the courts where they are necessary for the protection of the business for the benefit of which the covenant was made and no greater restraint is imposed than is reasonably necessary to secure such protection.” Allen v. Rose Park Pharmacy, 237 P.2d 823, 826 (Utah 1951) (emphasis added). Enforceable Non-Compete Agreements
  11. 11. 11 “Covenants not to compete are enforceable if carefully drawn to protect only the legitimate interests of the employer.” Robbins v. Finlay, 645 P.2d 623, 627 (Utah 1982). Legitimate Interests
  12. 12. 12  Consideration  No bad faith in negotiations  Necessary to protect some legitimate interest  Reasonable in time and space restrictions  Services are special, unique or extraordinary The Common Law Non-Compete Requirements in Utah
  13. 13. 13  Under Utah law, continued employment, in and of itself, may be sufficient consideration to support a non-compete agreement. See System Concepts, Inc. v. Dixon, 669 P.2d 421, 426-27 (Utah 1983)  This is not true in many jurisdictions Consideration
  14. 14. 14 The reasonableness of a non-compete agreement depends upon several factors, including the duration and geographical scope of the agreement, the nature of the employee’s job duties, “and the nature of the interest which the employer seeks to protect such as trade secrets, [or] the goodwill of [its] business[.]” Robbins, 645 P.2d at 627. Legitimate Interests
  15. 15. 15  Information that derives economic value from not being generally known  Not readily ascertainable by proper means  Reasonable efforts to maintain secrecy What is a Trade Secret?
  16. 16. 16 “Upon termination of his employment, an employee has the prerogative to use his general knowledge, experience, memory and skill, however gained, provided he does not use, disclose, or impinge upon any of the secret processes or business secrets of his former employer.” Microbiological Research Corp. v. Muna, 625 P.2d 690, 697 (Utah 1981) General Knowledge and Experience vs. Trade Secret
  17. 17. 17 Thank You

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Rise and Shine CLE presented on May 26, 2016 in Salt Lake City, Utah before the Litigation Section of the Utah State Bar. Christina M. Jepson

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