Are Non-Compete Agreements Legal in Utah?
Employers sometimes ask employees to sign a non-compete agreement either as a condition of employment or of continued employment. Typically, non-compete agreements are included as part of a larger employment contract but they are sometimes separate agreements signed by employees.
In January of 2023, the Federal Trade Commission (FTC) proposed a new rule that would ban employers across the country from proposing non-compete agreements. However, a federal court blocked the rule and the FTC has not proposed a new rule since. This begs the question of whether non-compete agreements are legal in Utah. Below, one of our Utah business law attorneys explains in further detail.
What are Non-Compete Agreements?
Non-compete agreements are legal contracts between an employer and an employee that prohibit the employee from working for a competitor after leaving the employer. Non-compete agreements also prohibit employees from engaging in activities that compete with the current or former employer’s business. Non-compete agreements should specifically state prohibited activities and include a defined period of time.
Non-compete agreements are meant to protect the employer’s business interests such as customer relationships, confidential information, trade secrets, and goodwill. They are particularly important when employees have access to specialized knowledge or sensitive information that could be a competitive advantage to the employer’s competitors if the employee were to leave the business.
Are Non-Compete Agreements Enforced in Utah?
Only three states in the country have banned non-compete agreements entirely and Utah is not one of them. As such, the courts will enforce these contracts if they meet the following requirements:
- All agreements must be in writing and signed by both the employer and employee.
- Agreements must be reasonable in geographic scope and duration.
- Agreements must protect an employer’s legitimate business interest.
- The restrictions within an agreement must not be greater than is necessary to protect the business interest of the employer.
- Agreements cannot conflict with public interest.
When a non-compete agreement meets the above requirements, the courts may enforce it if a lawsuit is filed. If the courts find in the employer’s favor, they can grant injunctive relief that prevents the employee from continuing to engage in prohibited activities. The court may also award compensatory damages to the employer for any loss they incurred that resulted from the employee’s breach of the contract.
It is important to note that disputes regarding non-compete agreements are very fact-specific and depend on the specific circumstances of a case. It is important for employers to speak to a Utah business law attorney who can draft the agreement to ensure their best interests are protected.
Call Our Business Law Attorneys in Utah Today for Help
Non-compete agreements are legal in Utah but it is critical that they comply with state law. At AGS Law, our Utah business law attorneys can draft your agreement, and make sure that you and your business interests are protected. Call us today at 801-477-6144 or chat with us online to schedule a consultation with one of our experienced attorneys and to learn more about how we can help your business.
Source:
le.utah.gov/xcode/Title15/C15_1800010118000101.pdf
