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Idaho Employment Law July 23, 2013 Newsletter

Right to Work

A right-to-work law is a statute that prohibits compulsory unionism. Under this statute, unions cannot require an employee to pay full union dues or join a union, even if he or she is working in a union shop. Right-to-work laws do not guarantee employment to job seekers-these laws prevent potential employees from being compelled to join a union as a condition of employment. In the United States, 24 states-including Idaho-have enacted right-to work laws. Idaho's right-to-work law, enacted in 1985 and passed by referendum in 1986, declares that in order to maximize individual freedom of choice in the pursuit of employment and to encourage an employment climate conducive to economic growth, that the right to work shall not be subject to undue restraint or coercion. The right to work shall not be infringed or restricted in any way based on membership in, affiliation with, or financial support of a labor organization or on refusal to join, affiliate with, or financially or otherwise support a labor organization.

Idaho Code 44-2001 (1985)

Idaho's right to work statue has important implications for employment and labor law. Employees or potential employees who believe that their right to work is being infringed upon by workplace regulations should contact Idaho Employment Law Solutions. We strive to provide counsel to clients that encourages prevention in order to avoid costly litigation.

Non-Compete Clauses

A non-compete clause is an agreement between an employee and an employer intended to prohibit the employee from competing with his or her employer after employment ends. Non-compete agreements typically say that the employee agrees not to work for rivals or solicit business from the employer's clients for a duration of time. The contract may also indicate geographic scope of the non-compete agreement.

IIn the United States, the majority of states recognize and enforce forms of non-compete agreements. Some states, like California, completely ban non-compete agreements, except under limited circumstances. Idaho is a state that generally disfavors restrictive covenants as well; however, Idaho has not banned restrictive covenants. A little history is in order on this point.

There is a very famous Idaho case called Freiburger vs J-U-B, 141 Idaho 415 (2005).  In Freiburger, the court stated that the law disfavors restrictive covenants in employment contracts. However, restrictive covenants are to be allowed where the employer can establish a legitimate business interest and the employer can show that the restrictions imposed on the employee are reasonable and not overbroad in nature. Additionally, Freiburger, followed the case law of the 9th Circuit in regard to restrictive covenants in employment contracts. In Freiburger, the court had no problem finding that a legitimate business interest existed and took the position of the District Court that “the prohibitive impact of the covenant was greater than necessary to protect the employer’s legitimate business interest.” Freiburger vs J-U-B, 141 Idaho 415, 421 (2005).

In 2008, the Idaho Legislature passed Senate Bill No. 1393 regarding non-compete agreements between employees and employers. This legislation followed decades of rulings in which courts in Idaho found that non-compete agreements are allowed in Idaho in certain situations. The bill, entitled “Agreements and Covenants Protecting Legitimate Business Interests” states that

A key employee or key independent contractor may enter into a written agreement or covenant that protects the employer's legitimate business interests and prohibits the key employee or key independent contractor from engaging in employment or a line of business that is in direct competition with the employer's business after termination of employment, and the same shall be enforceable, if the agreement or covenant is reasonable as to its duration geographical area, type of employment or line of business, and does not impose a greater restraint than is reasonably necessary to protect the employer's legitimate business interests.

Idaho Code § 44-2701

The definitions of “Key Employees” and “Legitimate Business Interest” were/are defined in Idaho Code §§ 44-2702(1) and 44-2702(2) as follows:

(1) “Key employees” and “key independent contractors” shall include those employees or independent contractors who, by reason of the employer's investment of time, money, trust, exposure to the public, or exposure to technologies, intellectual property, business plans, business processes and methods of operation, customers, vendors or other business relationships during the course of employment, have gained a high level of inside knowledge, influence, credibility, notoriety, fame, reputation or public persona as a representative or spokesperson of the employer, and as a result, have the ability to harm or threaten an employer's legitimate business interests.

(2) “Legitimate business interests” shall include, but not be limited to, an employer's goodwill, technologies, intellectual property, business plans, business processes and methods of operation, customers, customer lists, customer contacts and referral sources, vendors and vendor contacts, financial and marketing information, and trade secrets as that term is defined by chapter 8, title 48, Idaho Code.

It must be noted that although the bill passed, it was not passed overwhelmingly, with the majority of the “NAY” votes coming from the Democrats in both the House and Senate.  The bill that was passed, and which created a new chapter under the Labor Code, only applies to “Key Employees” and Key Independent Contractors” as defined by the statute; and, the definition of  “Legitimate business interests” is only applicable to this narrowly defined statute.  As to rebuttable presumptions established, these presumptions are only applicable to “Key Employees” and “Key Independent Contractors”.  Idaho Code § 44-2704 is applicable. Therefore, If “Key Employees” or Key Independent Contractors”can show that the restriction(s) seeking to be enforced by the employer  is/are unreasonable and overbroad, the restriction(s) will not be enforced per the statute and Idaho law.

Idaho businesses that draft non-compete agreements should be familiar with Title 44 Chapter 27 of the Idaho Code in order to carefully draft restrictive covenants that will protect their “legitimate business interests.” Employees as well should be familiar with the details of the non-compete agreements to avoid running into legal issues and protect their interest. Idaho Employment Law Solutions can advise you on drafting non-compete agreements to protect the interests of employers and employees while avoiding legal entanglements.


Past Newsletters

July 2, 2013 Newsletter