The Utah Court of Appeals Recently Upheld a Nationwide Geographical Scope of a Non-Compete Agreement as Reasonable and Enforceable
The Utah Court of Appeals recently issued a decision in England Logistics v. Kelle’s Transport, upholding a one-year, nationwide non-compete agreement.
Several C.R. England employees challenged the reasonableness and enforceability of their non-compete agreements. Among other things, they argued that the one-year term and nationwide geographical scope were overly broad and unreasonable, as the terms effectively barred them from working in any role within the trucking industry. They argued the restriction went beyond protecting C.R. England’s legitimate business interests and unfairly prevented them from pursuing work in the same field, regardless of whether they posed a direct threat to C.R. England’s specific business activities in particular regions.
In upholding the nationwide restriction, the court found that C.R. England is a major national player in the refrigerated trucking industry, whose operations span “coast to coast.” Thus, given C.R. England’s nationwide business model, the broad geographic scope of the non-compete reasonably protected its business interests across its operating territory and aligned with its actual business footprint and competitive interests.
The court also found that the one-year duration was reasonable because it was consistent with or less than other durations Utah courts have historically upheld. The court also ruled that the non-compete agreements were supported by valid consideration because each employee received either new or continued at-will employment in exchange for signing the agreement. The court rejected arguments that the agreements lacked consideration due to their “boilerplate” nature, citing that standardized contracts still count as consideration if they provide a legal benefit to both parties. The court’s decision underscores that under Utah law, consideration for non-compete agreements can be satisfied by at-will employment, whether it’s a new job offer or the continuation of an existing job.
This decision confirms that Utah courts will enforce non-compete agreements so long as employers can establish that the agreements are narrowly tailored to safeguard their legitimate business interests—even in situations where the geographical scope encompasses the entirety of the United States.
NLRB Sets New Standards on “Captive Audience” Meetings and Further Limits Employer Discussions on Effects of Unionization
This month, the National Labor Relations Board (NLRB) issued several decisions significantly restricting an employer’s ability to tell their employees that unionization is not in their best interests.
In one case, the NLRB ruled that an employer who requires employees to attend meetings in which a company expresses its views on unionization, i.e. “captive audience” meetings, runs afoul of the National Labor Relations Act (NLRA) because such meetings tend to interfere with and coerce employees in the exercise of their Section 7 rights. According to the NLRB, captive audience meetings violate Section 7 because they interfere with an employee’s right to decide whether, when or how to participate in union organization discussions and because it allows employers to observe and surveil its employees involved in such discussions. Also, the message conveyed during captive audience meetings has a “coercive character” that may deter employees from exercising their rights for fear of retaliation.
The NLRB did carve out an exception for employers to hold such meetings, so long as workers are provided reasonable advance notice of: (i) the subject of the meeting; (ii) that attendance is voluntary and there will be no adverse consequences for failing to attend; and (iii) that no attendance records of the meeting will be kept.
The NLRB also imposed a new standard for evaluating whether employer statements about how unionization would impact employer-employee relations violate the NLRA, abandoning decades of precedent, whereby such statements were presumptively lawful. Under the new standard, employer predictions of negative impacts from unionization “must be carefully phrased on the basis of objective fact to convey an employer’s belief as to demonstrably probable consequences beyond [its] control.” If such a prediction is not grounded in objective fact or predicts negative consequences that would result from the employer’s actions, it is “no longer a reasonable prediction based on available facts but a threat of retaliation based on misrepresentation and coercion.”
While the NLRB’s recent decisions have been very labor-friendly, the decision pendulum is likely to swing back in employers’ favor in the next four years under the new administration, which is expected to appoint a new general counsel in January. Until then, employers should remain vigilant about the current rules to avoid any potential violations of the NLRA.
The Ninth Circuit Finds Federal Contractor Minimum Wage Unlawful
In 2014, President Obama established a minimum wage for federal contractors at $10.10 per hour, citing the Procurement Act as authority. This was the first presidential directive setting contractor minimum wages. President Trump maintained the minimum wage but exempted seasonal recreational workers in 2018. President Biden reinstated broader coverage and raised the minimum wage, with annual adjustments. These executive orders expanded minimum wage requirements beyond what Congress enacted through statutes like the McNamara-O’Hara Service Contract Act (1965) and Davis-Bacon Act (1931), which mandate prevailing wages on specific contracts.
On Nov. 5, 2024, the U.S. Court of Appeals for the Ninth Circuit ruled in Nebraska v. Su that the president lacks authority under the Procurement Act to require federal contractors to pay a minimum wage. This decision creates a split with the Tenth Circuit, which upheld the contractor minimum wage under the Procurement Act (Bradford v. U.S. DOL). Other circuits, such as the Fifth and Eleventh Circuits, have also limited presidential authority, setting the stage for potential Supreme Court review.
Deviating from the Tenth Circuit’s ruling, the Ninth Circuit reversed a district court decision and ordered a preliminary injunction against the enforcement of the contractor minimum wage within the plaintiff states. In support of its decision, the Ninth Circuit reasoned as follows:
· The Procurement Act’s “economy and efficiency” clause is precatory and does not grant operative authority to establish a minimum wage.
· The Department of Labor’s (DOL) own analysis indicated the minimum wage could raise costs for contractors by $1.7 billion, conflicting with the stated goal of promoting efficiency.
· A presidential minimum wage conflicts with congressional wage-setting laws, such as the Davis-Bacon Act, which accounts for local wage variations.
· The DOL’s rule was deemed arbitrary and capricious under the Administrative Procedure Act because it failed to consider alternatives.
The ruling challenges the use of the Procurement Act for regulatory initiatives, potentially affecting other executive orders, including those on contractor sick leave and antidiscrimination measures. Administrative changes or further court rulings could modify or repeal the contractor minimum wage, with cascading effects on contract pricing and labor practices. Contractors should prepare for potential changes while maintaining compliance with state and federal laws, such as the Service Contract Act.
For now, though, the takeaway from this decision is that most contractors must still adhere to the existing minimum wage rules except those operating in the following plaintiff states: Arizona, Nebraska, Idaho, Indiana and South Carolina. Contractors in these states should consult federal contracting officers for guidance on compliance and recovery of costs.
