Non-Compete Agreements for In-House Counsel
Keith A. Call and Taylor P. Kordsiemon, J.
Recent history demonstrates there are but three certainties in life: death, taxes, and an annual light at the Utah State Legislature over non-compete agreements.
In each of the last few years, state legislators have introduced bills aimed at restricting the ability of employers to enforce non-compete agreements against their employees. Governor Herbert signed House Bill 2 51 into law in 2016, limiting the length of any non-compete period in an employment contract to one year. In 2017, a measure that would have required employers to pay extra consideration to enter a non-competition agreement with an employee was voted down. Finally, a law imposing a prohibition on non-compete agreements in the news media market passed earlier this year.
Governor Herbert has vowed that any further attempts to legislate non-compete agreements during his administration "will be met with a veto." Dennis Romboy, Utah Gov. Gary Herbert Reverses Previous Stance, Signs Bill Targeting Broadcasters, Deseret News, Mar. 29, 2018, https://www.deseretnews.com/article/9000l4224/utah-gov-gary-herbert-re-verses-previous-stance-signs-bill-targeting-broadcasters.html.
Even as Utah clamps down on non-compete agreements generally, there is mounting debate nationwide regarding the use of non-compete agreements for in-house attorneys.
Utah Rule of Professional Conduct 5.6 bars attorneys from entering agreements that would restrict the right to practice. The rule is generally understood as making any non-compete agreement between attorneys unenforceable. However, whether Rule 5.6 applies to in-house counsel seems less obvious.
To date, the American Bar Association (ABA) and seven state bar ethics committees have addressed the question. Two states allow non-competes for in-house counsel provided that they include a "savings clause," limiting the application of a non-compete to non-legal employment. In other words, the attorney is free to leave his or her current employer to represent...