SALT LAKE CITY — Gov. Gary Herbert apparently changed his thinking about noncompete contracts since the issue divided Utah's business community two years ago.
Employers on both sides of the debate pitting those who wanted to ban them outright against those who saw them as essential to survival went the rounds during the 2016 Legislature, eventually reaching a compromise restricting noncompete clauses in employee contracts to one year.
Herbert reflected on the issue at a Utah Valley Chamber of Commerce roundtable later that year, saying his office and lawmakers crafted the compromise together.
"As far as I'm concerned, it is resolved and there is no reason to revisit this divisive issue. Consequently, if the issue does re-emerge, I am not inclined to support any additional changes to the law," he said at the time, as quoted in the Provo Daily Herald.
On Tuesday, the governor signed a bill limiting the use of noncompete contracts in only broadcast media. It passed overwhelmingly in the House, but narrowly in the Senate.
In a brief letter explaining his decision, Herbert said HB241 strengthens Utah's policy on noncompete agreements by striking a "delicate" balance between business interests and employee interests.
"However, further restrictions on our noncompete policy are not necessary. Further attempts to legislate on this issue during my administration will be met with a veto," he said.
Noncompete contracts prevent employees from going to work for a competitor for a prescribed period of time. The 2016 law limits the time to one year.
The newly passed bill is focused solely on broadcast media — no other business — and restricts use of noncompete contracts to employees who make more than $47,500 a year. If an employee is fired for just cause or quits, the noncompete clause would be enforced. If the employer fires an employee without cause or doesn't renew the contract, it would not be enforced.
Utah's major TV stations opposed the measure, arguing they invest thousands of dollars promoting and developing their on-air personalities to build their brands.
Deseret Management Corp., which owns Bonneville International Corp., KSL, Deseret Digital Media and the Deseret News, uses noncompete agreements in some cases in its TV and radio properties.
In a letter to Herbert, Deseret Management President and CEO Keith B. McMullin argued that it is a First Amendment issue because the bill was narrowly constructed to broadcasting. Lawmakers passed the legislation at a time when the news media is being maligned and discredited on a national scale, he said.
"In the face of such assault, Utah must remain a vigorous protector of all First Amendment rights, including freedom of the press. In its current form, this bill oversteps important constitutional liberties and will erode the protected status afforded the news media," he wrote.
McMullin said the law might also signal that the government in Utah is inclined to meddle with the press.
The governor's office did not seek the legislation because it believed the 2016 bill addressed the broad concerns over noncompete clauses, said Herbert spokesman Paul Edwards.
Herbert signed the bill after lengthy discussions with its sponsor, Rep. Mike Schultz, R-Hooper, business leaders and broadcast executives and employees. He also consulted with legal experts.
The narrow focus of the law limits potential unintended consequences, though some have questioned whether it creates an unconstitutional burden on the media, Edwards said, noting legislative attorneys did not signal any constitutional issues and other states have put restrictions on noncompetes in the media.
"Our office’s consultation with legal experts about this issue has been inconclusive," Edwards said. "Gov. Herbert would not have signed the bill if he believed it was constitutionally defective."
Rep. Tim Hawkes, R-Centerville, said during a House floor debate that the reason the bill singles out broadcasting is because noncompete contracts silence the media who are uniquely positioned to be a voice of trust in the community. Such clauses keep reporters out of the market if they want to change jobs, he said.
"That goes right to the heart of the First Amendment," he said.
That argument was countered by Salt Lake media attorney Jeff Hunt, who stated in a letter to Herbert that “the First Amendment protects a free press by limiting the role of government in newsrooms. . . . . The idea that the First Amendment authorizes the government to meddle in private contracts to promote its view of the free flow of speech is anathema to our system of government.” Hunt represented DMC on this issue.
Opponents of the bill also contend it opens the door for the Legislature to target other industries.11 comments on this story
Schultz, who called noncompete agreements "anti-American," said he limited the law to broadcasters because he became aware of widespread abuse in the industry. He assured Herbert the new law solves the problem he saw and that he doesn't intend to go after other businesses.
Newly named Salt Lake Chamber President and CEO Derek Miller said he expects Schultz and Herbert to keep their commitments.
Now that the legislation is passed and signed, he said, "we would expect everyone to say, 'OK, problem solved. We're going to move on and this ought to stay where it is now.'"
"We don't want Utah to become a California or a New York where we're putting limits on the ability for companies to enter into contracts with their employees, " Miller said.