Wednesday, June 30 2021

Non-Compete Enforcement in Utah: What You Need to Know

by EKR Administrator

The specifics of non-compete enforcement law in Utah has changed three times in the past five years. If you are having trouble keeping up with the law, this article may help you navigate those changes and what they might mean for you.

What is a Non-Compete Agreement?

A non-compete agreement is a contract between an employee and an employer. These agreements may prohibit the employee from entering into competition with the employer after the employee leaves the employer’s company. These agreements may help the employer prevent the employee from working in a rival business after the employment period is over. Depending on the geographic location of the company, the parameters of non-compete agreements and the requirements the agreements must meet in order to be enforceable may vary.

How are Non-Compete Agreements Enforced in Utah?

Utah law favors protecting a company, while simultaneously disfavoring the prevention of competition. This is a difficult balance to strike, and it may be the reason that the law has been amended so many times in the last few years. Under the most recently amended section 34-51-201 of the Utah Code, “an employer and an employee may not enter into a post-employment restrictive covenant for a period of more than one year from the day on which the employee is no longer employed by the employer.” This law applies to non-compete agreements entered into on or after May 10, 2016. A non-compete agreement that violates this mandate is likely void, though there are some exceptions. 

Some of these exceptions are detailed in section 34-51-202 of the Utah Code. This law states that a non-compete agreement may be enforced if it is part of “a reasonable severance agreement mutually and freely agreed upon at or after the time of termination.” The non-compete agreement must also meet the common law requirements imposed by Utah courts in order to be enforceable. In Kasco Servs. Corp. v. Benson, the Supreme Court of Utah decided that a court is required to enforce a non-compete agreement if the party seeking to enforce the agreement can show:

  1. The agreement is “supported by consideration,”
  2. There was no “bad faith” in contract negotiations,
  3. The agreement is “necessary to protect the goodwill of the business,” and
  4. It is “reasonable in its restrictions in terms of time and geographic area.” 

To add another layer of complexity to Utah’s non-compete laws, there are also some exceptions that were written into the amended statute to apply to the broadcasting industry. However, if you do not work in the broadcasting industry, you may not want to concern yourself with these specific statutory exceptions. 

Ensure Your Non-Compete is Written Correctly

Since the Utah Legislature has amended Utah laws to limit the enforceability of non-compete agreements, it is important to ensure that your non-compete agreement is written correctly. An agreement that does not comply with the most recent updates in the law may be void. Further, an employer attempting to enforce a non-compete agreement in a Utah court may be liable for the employee’s damages, costs, and attorney’s fees if that non-compete agreement is ultimately deemed to be unenforceable.

Regardless of the potential pitfalls, a well-drafted non-compete agreement may be a vital tool to protect your business. To avoid those potential pitfalls and obtain the best protection possible for your business, you may want to discuss the unique aspects of your company with an experienced attorney. An attorney who is well-versed in Utah’s non-compete laws will be able to help draft a non-compete agreement that offers your business the most protection possible while simultaneously comporting with Utah’s legal standards. Employees who believe their non-compete agreements may violate Utah law may also want to contact an attorney who can help them understand their options. Non-compete agreements are often complex and their legal implications may be difficult to decipher. Federal, local, or municipal laws may impose additional or different requirements. For these reasons, it may be valuable to discuss the intricacies of your individual situation with a TraskBritt attorney so that they can help you achieve the outcome you desire. For additional questions about non-compete agreements, or other legal situation you might be in, get in contact with us here at TraskBritt today.

By Ashley Kennedy