Is Your Non-Compete Ethical? Long touted as good for business, your non-compete agreements might be putting your employees at a disadvantage.

AuthorCiaramella, Elainna

"Non-compete agreements have always bothered me," Brandon Rodman, CEO and cofounder at Weave, recently said in a LinkedIn post. "I understand the need to protect intellectual property and trade secrets, but 99 percent of the time non-competes are not used for those purposes. Instead, they are used to lower the market value of individuals who are exercising their right to change jobs.

"Even worse--much worse--non-competes are sometimes enforced when a company lays off an employee. That is flat out kicking someone when he or she is down, largely because you (the employer) failed."

His post got my wheels turning ... are non-compete agreements ethical? And how do they affect companies and employees? Companies typically don't pursue legal course over non-compete agreements--it's not worth their time, money, or potential reputation risk--but if that's the case, why have them in the first place?

What exactly are the legal ramifications of a non-compete?

According to James R. Moss, Jr., partner at Payne & Fears LLP, a non-competition agreement prohibits an employee from joining an organization and using the knowledge and relationships gained from a prior employer to compete with that employer. It also allows the employer to recover economic damages against an employee who breaks the agreement by diverting customers from the former employer to the new employer.

However, the Post-Employment Restrictions Act isn't the only means of legal recourse. According to the Act, "the employer was liable to pay that employee's damages, costs, and attorney fees," says Brian T. Welch, a commercial litigator at Snell & Wilmer. Not the case if they repurpose the same type of claims as a "misappropriation of trade secrets." By doing this, employers tipped the scale back in their favor, placing all liability on the former employee. "If you look at those two statutory schemes [Post-Employment Restrictions Act and UTSA]," says Welch, "the non-compete statute is employee-friendly, but the UTSA is a little more skewed in favor of the employer because whoever wins a trade secret case can get attorney fees."

Why some employers support non-compete agreements

I contacted Bryan K. Benard, a partner and the practice group leader for the labor and employment group at Holland & Hart LLP, who was also involved in "Current State of Non-Compete Agreements in Utah," a 2017 study commissioned jointly by the Utah State Legislature and the Salt Lake Chamber.

He had been representing a...

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