A Utah non-compete agreement establishes terms under which an employee cannot compete against their employer for a certain amount of time after their employment ends. These terms generally prohibit activities like soliciting customers, selling or providing similar products or services, and working for competitors within a designated geographical area. Utah employer-to-employee non-compete agreements can’t last longer than one (1) year from the date of termination. Contracts that impose a greater time restraint or are otherwise unreasonably restrictive are void and unenforceable.
In Utah, non-compete agreements are enforceable contracts governed by the Post-Employment Restrictions Act and common law. For the agreement to be enforced in court, the employer must demonstrate that:
- The non-compete restrictions are supported by consideration;
- The contract was negotiated in good faith;
- The non-compete restrictions are required to protect the business’s goodwill; and
- The time and geographical non-competition restrictions are reasonable.
- General employment relationships. A non-compete agreement is enforceable against an employee to protect the employer’s legitimate business interest (e.g., trade secret, training invested in employee). They can also only be imposed if the employee provides special, unique, or extraordinary services.
- Broadcasting employees. An employer may enforce a non-compete agreement against a salaried broadcasting employee if:
- The broadcasting employee is paid at least $913 a week or a rate that qualifies for an exemption under the Fair Labor Standards Act, 29 U.S.C. Sec. 213(a), whichever is greater;
- The non-competition restrictions are a component of a written employment contract with a reasonable duration; and
- The broadcasting employee is terminated with cause or violates the terms of their employment in a way that makes them no longer eligible for employment.
- Selling a business. Non-compete agreements made in connection with the sale of a business may be enforced upon the seller.
- Lawyers. A lawyer cannot propose to make or enter into the following:
- An agreement preventing a lawyer from continuing to practice law after their employment or contract terminates (not applicable to agreements concerning retirement benefits).
- An agreement in which the resolution of a client dispute includes a restriction on the lawyer’s ability to practice law.
One (1) year. A non-compete agreement entered into after May 10th, 2016, cannot last longer than one (1) year after the employment relationship ends. This rule does not apply to restrictions included in a mutually agreed upon severance agreement made at or after the employee’s termination. It also doesn’t apply to restrictions made in conjunction with the sale of a business, provided that the restricted party receives something of value from the sale.
- Broadcasting employees. Restrictions for broadcasting employees cannot last longer than the earlier of:
- The day that the original employment contract containing the restrictions ends; or
- One (1) year from the end of the employment relationship.
When deciding whether the geographical restrictions of a non-compete are reasonable, Utah courts will consider the type of clientele served by the employer and the location of the business. The Utah Supreme Court previously upheld a two-mile restriction prohibiting a pharmacist from competing locally with their former employer. Another case involving a cable company resulted in a nationwide restriction because the company’s customers were located across the entire country.
Sufficient consideration is established when a non-compete agreement is entered into at the start of an employment relationship. Continued at-will employment (or the promise thereof) is another form of sufficient consideration.
- Kasco Services Corp. v. Benson, 831 P.2d 86, 95 (Utah 1992)
- Robbins v. Finlay, 645 P.2d 623 (Utah 1982)
- § 34-51-201
- Electrical Distributors, Inc. v. SFR, Inc., 166 F.3d 1074, 1085-1086 (10th Cir. 1999)
- Utah R. Prof. Cond. 5.6
- § 34-51-202
- System Concepts, Inc. v. Dixon, 669 P.2d 421 (Utah 1983)
- Allen v. Rose Park Pharmacy, 120 Utah 608, 237 P.2d 823 (Utah 1951)
Utah Non-Disclosure Agreement – A form that restricts the disclosure of a company’s confidential information.
Utah Non-Solicitation Agreement – Prevents ex-employees from poaching the clients or employees of their former employer.